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Rating:December 4, 2000 Not Rated 3.0 Email Routing List Email & Route  Print Print
Monday, December 04, 2000

December 4, 2000

Reported by Sean Hanna, Editor in Chief

SEC Fines For Bond Fund
From Wall Street Journal
The wheels of justice are said to turn slowly. Last week a bond fund was fined by an SEC administrative law judge after suffering steep losses in its fund. No, it was not Heartland. The $2 million fine was levied against Piper Jaffrey Asset Management for violations of securities laws in 1994 when its Institutional Government Income Fund suffered 25 percent losses after writing off losses on "kitchen sink" derivatives. The judge ruled that Worth Bruntjen the fund manager deviated from the funds stated investment objective, failed to disclose the riskiness of the fund's investments and reported inaccurate prices for the fund. Before this latest fine, Piper Jaffrey (now owned by U.S. Bancorp) has paid $90 million in settlements and fines. U.S. Bancorp has not decided whether to contest the fine.

Hedge Funds May Prove A Conflict
From Wall Street Journal
Is it a conflict for mutual fund firms to oversee hedge funds also? The paper reports that a growing number of firms are now overseeing both types of investments, often with the same portfolio manager. Highlighted are RS Investment Management, Alliance Capital Management, Vanguard Group, Firsthand Funds, Calamos and MFS Investment Management. Fund firm's not using the same managers for both hedge funds and mutual funds include American Express and Strong Capital Management, according to the article. It adds that Putnam, Scudder Kemper and Invesco Funds are considering hedge funds. The article lays out possible conflicts a manager wearing both the mutual and hedge hats faces. One area it fees, hedge fund manager are paid based on fund profits, which provides an incentive for the manager to watch out for the hedge fund first.

Likely Regulations for 2001
From Wall Street Journal
The Journal hangs out the laundry list of new regulations and legislation for investors to look at. Areas where their may be regulatory change in the next six months are: the reporting of fees in dollars and cents as well as a percentage, changes in capital-gains distributions, after-tax performance reporting, more performance disclosure such as clarifying a funds reliance on IPOs, matching names more closely to fund objectives, new crack-downs on window dressing and portfolio pumping, more frequent portfolio holding updates, and stream-lined semiannual reports. Also likely to be addressed are corporate governance issues such as the independence of fund boards,

More Disclosure for Affiliated Transactions?
From TheStreet.com
FundDemocracy's Mercer Bullard argues that the Heartland "fiasco Shows need for conflict-of-interest rules" for funds. The danger, he writes, is that "sweetheart transactions between mutual funds and associated companies" are a danger to fund investors. He cites a sale of distressed munis to the State of Wisconsin Investment Board (SWIB) in which Heartland and William Nasgovitz promised SWIB a 20% annual return and return of principal. Jon Hammes, SWIB's chairman, serves on the board of both Heartland funds. He also calls for Congress to strengthen affiliated transaction rules, rather than weaken them, as the Securities Industries Association wants, to prevent this type of case in the future. 

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