Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, January 28, 2008

SEC Settles Charges Against Heartland Advisors for Mispricing Bonds

The SEC recently settled administrative proceedings against Heartland Advisors, Inc. (Heartland), a Wisconsin-based investment adviser, and several current and former employees of Heartland.  The Order finds that from March 1, 2000 into October 2000, Heartland negligently mispriced certain bonds owned by two high-yield municipal bond funds. The funds' portfolios included several municipal bonds that were valued by the funds at prices above their fair values. As a result, throughout that time period, the funds' net asset values were incorrect, the funds' shares were incorrectly priced, and investors purchased and redeemed fund shares at prices that benefited redeeming investors at the expense of remaining and new investors. On October 13, 2000, Heartland devalued the bonds, thereby resulting in approximately $60 million in monetary losses to shareholders.

The Order imposes civil penalties, disgorgement, and prejudgment interest totaling $3,907,095.

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