Heartland fined $3.9M for mispricing funds
When projects went into default or were failing, Heartland didn't accurately re-price the funds, the SEC said.
The Securities and Exchange Commission has ordered Heartland Advisors Inc. to pay $3.9 million in penalties for marking down the prices of two municipal bond funds more than seven years ago.
The company and its chief executive, William J. Nasgovitz, were fined $3.5 million.
Heartland chief operating officer Paul T. Beste and former employees Thomas Conlin and Greg D. Winston were fined $95,000 each.
Senior vice president of trading Kevin D. Clark and former employee Kenneth J. Della were ordered to pay $25,000 each.
The SEC alleged that the Milwaukee-based investment firm failed to properly price the value of some bonds in the Short Duration High-Yield Municipal Fund and the High-Yield Municipal Bond Fund in 2000.
The funds had invested primarily in non-rated medium- and lower-quality municipal bonds.
When projects underlying some bonds held by the funds went into default and other projects were failing, Heartland didn’t accurately re-price the funds to reflect the lower valuations, the SEC said.
The net asset value of the high-yield fund plummeted 69.4% in one day, and the short-duration fund fell 44%.
As a result, investors lost about $60 million when Heartland Advisors was forced to devalue bonds in the funds in October 2000.
The employees agreed to the SEC order without admitting or denying its findings.
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