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Heartland Advisors gets cease and desist order from SEC
By Jennifer Chiou
New York, Jan. 28 - Heartland Advisors, Inc. received a cease and desist order from the Securities and Exchange Commission on Friday related to violations of the Securities Act of 1933, Investment Advisers Act of 1940 and Investment Company Act of 1940, the SEC announced.
The order alleged 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, the order said. As a result, throughout that 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.
According to the order, on Oct. 13, 2000, Heartland devalued the bonds, thereby resulting in about $60 million of losses to shareholders.
The SEC named several current and former employees of the Milwaukee, Wis.-based investment adviser, including William J. Nasgovitz, Thomas J. Conlin, Greg D. Winston, Paul T. Beste, Kevin D. Clark, Kenneth J. Della and Hugh F. Denison.
According to the SEC, the respondents consented to the order without admitting or denying the findings.
The order imposes civil penalties, disgorgement and prejudgment interest totaling $3,907,095, censures Heartland advisors, Nasgovitz, Conlin, Winston, Beste, Clark, and Della, and imposes 12-month suspensions against two former employees, Winston and Della, for liquidating their shares of the mutual funds prior to the Oct. 13, 2000 devaluation.
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