The SEC filed a complaint in federal court against Heartland Group and obtained a court order to freeze the assets of its three municipal bond funds the High-Yield Municipal Bond Fund, Short Duration High-Yield Municipal Fund and Taxable Short Duration Municipal Fund. The complaint and injunction were filed in U.S. District Court for the Northern District of Illinois because Heartland failed to file an annual report with the SEC or to shareholders. The SEC alleged that the failure to file was due to Heartlands inability to obtain audited financial results for the three funds for fiscal 2000.
The court appointed Phillip L. Stern of the law firm Freeman, Freeman & Salzman to take control of the assets, manage the funds, suspend redemptions in the funds and, if appropriate, liquidate them. Assets in the three funds were about $33 million as of March 20, said Aaron Picard, Heartland investment communications manager. Thats down from about $125 million at the end of October, when pricing woes first caused problems with the Heartland muni-bond funds, and is hundreds of millions of dollars less than the funds had in the beginning of 2000.
The SEC said in a statement that its investigation continues.
Heartlands other mutual funds Select Value Fund, Value Plus Fund, Value Fund or Wisconsin Tax Free Fund and separate accounts were not affected by the SECs action.
Heartland officials believe that the move is "in the best interests of the shareholders, said Mr. Picard. "This permits us to focus on what we do best value (equity) investing.