The MFWire
Manage Email Alerts | Sponsorships | About MFWire | Who We Are

Subscribe to MFWire.com's News Alerts [click]

Rating:Morningstar Now Faces SEC Probe Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, September 24, 2004

Morningstar Now Faces SEC Probe

by: Sean Hanna, Editor in Chief

For the third morning in a row Morningstar is prominent in the headlines, but this time it is likely unhappy with the coverage. The Wall Street Journal is reporting that the fund tracker is in hot water with the SEC because it failed to correct inaccurate performance data on a fund. The failure to fix the data could lead to civil charges being filed, the paper adds.

The paper's report is based on an interview with Joseph Mansueto, Morningstar's founder and chairman. He reportedly also said that Morningstar officials are talking with SEC staff to find a way to settle the case.

The case is an interesting one in that the SEC has no jurisdiction over publishers. It is basing its claim on allegations that by recklessly handling data Morningstar could have deceived investors. That argument seems a stretch, but the SEC may have greater leverage in this case since Morningstar remains in the midst of the IPO process and is dependent on the SEC for the offering to go off as planned.

The error happened in data Morningstar published about the little-known Rock Canyon Top Flight stock fund. Morningstar miscalculated the impact of a capital gains distribution the fund made and as a result overstated its performance. The fund tracker then took 13 days to correct the performance data on its Web site after it was informed of its error. During that time (March 12 to March 25) the fund was listed as the top performer in its peer group.

Still, the error may not have influenced any investors, a fact that raises questions about the SEC's high-handed approach. The SEC contacted the fund's manager in late March while the error was still on the Morningstar Web site, and the manager told it that no new money had come into the fund since Morningstar made the error. That fact would seemingly raise a question about whether Morningstar had deceived any investors.

Mansueto also told the paper that though the SEC first contacted Morningstar in April, it was not until the firm filed its S-1 that it was clear the fund tracker was the target of the SEC probe.  

Stay ahead of the news ... Sign up for our email alerts now

 Do You Recommend This Story?

Return to Top
 News Archives
2024: Q3Q2Q1
2023: Q4Q3Q2Q1
2022: Q4Q3Q2Q1
2021: Q4Q3Q2Q1
2020: Q4Q3Q2Q1
2019: Q4Q3Q2Q1
2018: Q4Q3Q2Q1
2017: Q4Q3Q2Q1
2016: Q4Q3Q2Q1
2015: Q4Q3Q2Q1
2014: Q4Q3Q2Q1
2013: Q4Q3Q2Q1
2012: Q4Q3Q2Q1
2011: Q4Q3Q2Q1
2010: Q4Q3Q2Q1
2009: Q4Q3Q2Q1
2008: Q4Q3Q2Q1
2007: Q4Q3Q2Q1
2006: Q4Q3Q2Q1
2005: Q4Q3Q2Q1
2004: Q4Q3Q2Q1
2003: Q4Q3Q2Q1
2002: Q4Q3Q2Q1
 Subscribe via RSS:
Add to My Yahoo!
follow us in feedly

©All rights reserved to InvestmentWires, Inc. 1997-2024
14 Wall Street | 20th Floor | New York, NY 10005 | P: 212-331-8968 | F: 212-331-8998
Privacy Policy :: Terms of Use