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This page was last updated on December 1, 2000. Articles by Fund Democracy: Archives Heartland Fiasco Shows Need for Conflict of Interest Rules, TheStreet.com (Dec. 1, 2000). Abstract: The recent collapse of two Heartland Advisors muni-bond funds brought home to many investors the potential danger of investing in high-yield, or junk, bonds. But there's another, perhaps more important, lesson there about the dangers of sweetheart transactions between mutual funds and associated companies. In September, shortly before their problems became public, the two Heartland funds, High Yield Municipal and Short-Duration High Yield Municipal, sold a portfolio of distressed bonds to the State of Wisconsin Investment Board, or SWIB. It appears the deal may have been the brainchild of SWIB's chairman, Jon Hammes, who also happens to be on the board of both muni funds. The sale appears not to have broken any conflict-of-interest laws, which in any case are riddled with loopholes. But as the financial services industry prepares to mount a campaign to further water down these laws, it serves as a timely reminder of why Congress saw the need to establish them in the first place. (View the full text of this article.) |