Iowa The Securities and Exchange Commission recently took drastic action in this case. In late March the SEC obtained a court order freezing the assets of three Heartland municipal-bond funds. A court-appointed receiver will take control of the funds. The receiver will suspend redemptions and possibly liquidate the funds. Many fund holdings trade rarely and are hard to price.
Pricing is especially tricky for the nonrated muni bonds that the funds owned.
The funds' free falls occurred after notable drops a few weeks earlier. Morningstar analyst Eric Jacobson says he suspects that after investors redeemed shares because of those drops, Heartland tried to sell some bonds and found it couldn't get nearly what it thought they were worth. At least seven lawsuits have been filed against Heartland, alleging that it made false and misleading statements about the funds' net asset values and the risks involved in investing in them. The Kiplinger Washington Editors, Inc.