Value Line Replaces Chief as Firm Sets $43 Million SEC

By Joshua Gallu

Nov. 5 (Bloomberg) -- Value Line Inc., advertised as “the most trusted name in investment research,” replaced its leader and agreed to pay $43 million to settle U.S. claims that the firm charged nine of its own mutual funds for “phantom” brokerage services.

Chief Executive Officer Jean Buttner, 74, stepped down and will pay a $1 million fine, according to a company filing and a statement from the Securities and Exchange Commission yesterday.

Former Chief Compliance Officer David Henigson, 52, also resigned and will pay $250,000. Both were barred from the industry or serving as a company officer, the SEC said.

“Value Line misappropriated millions of dollars from the mutual funds they managed by artificially allocating fund trades and then charging the funds for phantom brokerage services,” Robert Khuzami, head of the SEC’s enforcement division, said in a statement. “Such blatant wrongdoing will not be tolerated.”

The firm, described on its Web site as “synonymous with trust, reliability and objectivity,” reaped more than $24 million from 1986 to 2004 in brokerage fees on trades for Value Line mutual funds that were funneled through its affiliated broker, Value Line Securities Inc., the SEC said.

The unit didn’t perform bona fide services on the trades, according to the SEC, which called the practice “fraudulent.”