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Fund Data Inaccuracy Investigated

September 25, 2004|From Associated Press

CHICAGO — The Securities and Exchange Commission is investigating mutual fund tracker Morningstar Inc. for failing to properly correct inaccurate data it published about one fund, the firm said Friday.

In a letter to Morningstar customers, Chief Executive Joe Mansueto said the investigation related to performance data the firm reported for the $19-million Rock Canyon Top Flight Fund.

Mansueto said Chicago-based Morningstar originally published correct returns for the Provo, Utah-based fund in late February but changed them after an employee of the fund's record-keeping company suggested that the listed net asset values, or NAVs, were inaccurate.

Mansueto said the record keeper sent Morningstar new data that incorrectly adjusted the NAVs for a capital gains distribution in December. Morningstar entered those figures in its database, Mansueto said.

On March 12, the record keeper sent Morningstar another communication, advising that the revised numbers were inflated, Mansueto said. But that communication supplied the same numbers as the record keeper's first communication, he said. After researching the new note, Morningstar left the data unchanged, he said.

On March 23, the SEC contacted Morningstar to say the fund information was wrong.

"We believe the heart of the SEC's concern relates to our timeliness in correcting the data ... from March 12 to March 23," Mansueto said.

Jonathan Ferrell, manager of Rock Canyon Top Flight, said he didn't believe that Morningstar intentionally did anything wrong. Also, "No investors purchased the mutual fund during that time, so it is not like anyone was hurt by this," he said.

Mansueto said Morningstar's data collection process included more than 200 quality controls. "While no data provider can operate with 100% accuracy, this always has been, and always will be, our goal," he said.

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