The SEC brought an administrative action against Heartland Advisors, Inc. (Heartland), a Wisconsin-based investment adviser, and several current and former employees of Heartland: William J. Nasgovitz, Thomas J. Conlin, Greg D. Winston, Paul T. Beste, Kevin D. Clark, Kenneth J. Della, and Hugh F. Denison, for negligently mispricing bonds owned by two high-yield municipal bond funds. The SEC found that 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 SEC imposed civil penalties, disgorgement, and prejudgment interest totaling $3,907,095, censured Heartland Advisors, Nasgovitz, Conlin, Winston, Beste, Clark, and Della, and imposed twelve-month suspensions against two former employees, Winston and Della, for liquidating their shares of the mutual funds prior to the October 13, 2000 devaluation.
Click http://www.sec.gov/litigation/admin/2008/33-8884.pdf to access the administrative action.