By: Glenn EdwardscloseAuthor: Glenn Edwards Name: Glenn Edwards
Member: Member Paladin
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Email: glenn@afadv.com
Site: http://paladinregistry.com/external/beaninformedinvestor/advisor_profile.php?advisor_id=2867
About: See Authors Posts (4) | November 6, 2009 | Investor Information

One of the oldest and most “trusted” sources of investor information and fund management has succumbed to committing fraud against investors. I can remember using Value Line as a resource for class research and term papers back when I was an under graduate student in the 1970s. Granted, the fraud committed was not against the market statistics service that Value Line independently provides to the profession and the public, but this blatant act of thievery tarnishes the good will the Value Line name has established over the years.

To summarize:The SEC charged Value Line’s CEO, Chief Compliance Officer (COO), and it’s affiliated broker dealer with defrauding the Value Line Family of Funds of more than $24 million in fake commissions. The scam was started in 1986. Value Line, while serving as investment adviser to the fund, directed some of the funds’ trades through Value Line Securities through its “commission recapture program” that was set up to rebate a portion of trade commissions to the funds.

Value Line arranged for one of several unaffiliated brokerages to execute and clear the trades at a discount of one to two pennies per share. Rather than passing this discount on to the Value Line funds, Value Line had the brokers bill the funds almost a five cent premium per share and then rebate the difference to Value Line Securities (VLS). VLS received more that $24 million in bogus commissions and falsely represented to the funds’ Independent Directors/Trustees and shareholders that VLS provided bona fide brokerage services for the commissions it received and that VLS otherwise served the best interests of the funds and their shareholders. Value Line CEO Buttner oversaw the “commissions rebate” program and with the CCO and made materially misleading statements and omissions about VLS and the recapture program to the funds and their shareholders in presentations to the Independent Directors/Trustees and in public filings with the Commission.

As per the woeful legal system, the two perps agreed to settle the SEC’s charges by consenting, without admitting or denying the Commission’s findings. However they are each barred from association with any broker, dealer, investment adviser and investment company; and are prohibited from acting as an officer or director of any public company. For those attempting to build a legitimate business in the advisory industry, the recent cascade of increasing blatant fraud makes the task that much more difficult from an increasingly skeptical consumer.

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