Thursday, January 30, 2014

Value Line Fair Fund

This is kind of puzzling. Back in 2009 Value Line settled charges that from 1986 through 2004 it had been cheating investors in its mutual funds by having the funds pay inflated commissions which were then partially kicked back to Value Line. As part of settlement the Value Line Fair Fund was set up to reimburse damaged shareholders. Since I was a shareholder in two of the funds during the period in question (see here and here)  I was eventually sent a claim form which I duly filled out and returned in June of 2011.  My claim was initially denied (for bogus reasons) but I submitted an appeal and additional documentation in February of 2012 which was accepted.

Recently I became curious as to why I hadn't heard anything more about this.  I poked around a little on the internet and found that on April 26, 2013 the SEC had issued (34-69469) an "Order Directing Disbursement of Fair Fund",  This order says in part:


The Plan provides that a portion of the Fair Fund consisting of disgorgement,  prejudgment interest, and civil penalties, plus any accrued interest less a reserve for expenses and taxes, be transferred by the Commission to The Huntington National Bank for distribution by the Fund Administrator when a validated list of payees with the identification information required to make the distribution has been received and accepted by the staff. The validated list of payees, which is for a total disbursement amount of $21,053,635.14, has been received and accepted.



Accordingly, it is ORDERED that the Commission staff shall transfer $21,053,635.14 of the Fair Fund to The Huntington National Bank, and the Fund Administrator shall distribute such monies to investors, as provided for in the Plan.


This started me worrying that my check had been sent to my old address or lost in the mail or something.  But when I called the Fair Fund help number they told me that despite the above the SEC was still reviewing the claims list and they had no idea when the money would be distributed.

Hopefully it won't be too much longer.  The whole process has been more than a bit annoying.  It will be really aggravating if it turns out my claim is valued at less than $10 in which case I won't receive anything (the claims forms provided no useful advice as how to estimate your claim value and thus determine if it was worth expending the considerable effort and some expense involved in filing a claim).

42 comments:

  1. It is quite troublesome that we have not heard word one since providing all that information.

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  2. I emailed them yesterday and they did write back

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    Please be advised that we are currently working with the Securities and Exchange Commission in a process of re-reviewing the list of eligible claimants. Once the review is complete, the SEC will re-set forth the distribution order. As this is an extensive process detailing the data for over 100,000 claimants, spanning 18 years, covering nine funds and including multiple interest components, there is not currently a set timeline for the distribution.

    We appreciate your patience in this process.

    Kind regards,

    Fund Administrator

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    1. Haven't received any further information about this. I filed my claim in 2011. I used to write to A.B.Data Co, but lately, they've stopped responding. Has anyone seen so much as a farthing?

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  3. Thanks for the info. As I recall that's more or less what they told me on the phone back in January.

    It's tempting to speculate that some major problem has become apparent with the process that the SEC has no idea how to fix. But who knows. Maybe this just isn't a high priority for the SEC. I suppose at some point I might try writing my Congressman.

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  4. As we all sit here suffering from justice delayed is justice denied...... has anyone got an update on this? Perhaps we all need to join ourselves together in an association to remonstrate with our legislative representatives and the SEC commissioners? Don't claimants have any standing?

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  5. I was just wondering what is taking so long with this settlement. When I called last fall, I was told that they expected disbursement sometime around July. What is going on? It's been 3 years since the deadline for filing a claim.

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  6. I have been told so many lies when I inquired about my payment I no longer believe anything the SEC folks or the Value Line Fair Fund folks tell me.
    If 100,000 claimants sent letters to their Congressman they might pay attention.

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  7. Thanks for this....at least now I know I'm not the only one who waits and wonders.......

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  8. Same story here. I have been calling every month for 3 years. I will continue to do so and I have even called the SEC lawyer working on the case (forgot his name) and they told me the same aforementioned story.

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  9. I made a connection with an officer at the firm which had been charged with determining the amount of compensation due each investor. He said that his firm had not properly done its job, so another company has been hired to complete the task. I have contacted him every quarter for over a year and he has been more knowledgable and forthcoming than anyone answering the 800 number. It's amazing that a company dedicated to determining compensation could spend years at it, then screw up so badly that another firm has to clean up the mess. Wouldn't you like a job where you're not accountable if you fail? I wish I had better news for others in my situation. I just want the money due me.

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  10. ... his firm had not properly done its job ...

    Thanks for the info. This is a bit surprising to me. The allocation methodology on the Fair Fund website is a bit complicated and perhaps not totally specified (so there may be some room to argue about implementation details) but still I wouldn't expect it to be all that difficult to write a computer program which would compute the amounts (given that the required inputs are available in some reasonable format). Do you know what the specific issue was?

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  11. Mr. Shearer, my name is Patrick Temple-West and I am a journalist with Politico in Washington. I cover the Securities and Exchange Commission and am wondering if you would like to talk about your experience with the Value Line fair fund. The issue of fair funds has gotten attention recently, http://www.wsj.com/articles/daniel-m-gallagher-and-michael-s-piwowar-dissenting-from-an-sec-windfall-for-lawyers-1415665948 I am looking into the issue. I can be reached at ptemple-west@politico.com thank you.

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  12. Has anyone hear anything on this matter recently?

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    1. Every month they update the month's date on the Value Fair Fund website . So for example it now reads

      PLEASE NOTE: AS OF SEPTEMBER 2015 ...

      There have been no other signs of life as far as I know.

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  13. I wrote my Senator who forwarded on to SEC. I received a letter from the deputy director dated 9/27/2015 saying A.B. Data is still reviewing the more than 100,000 claims. My guess this is just a way that the administrative form and attorneys will claim the majority of the settlement.

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  14. I have been quoted how much money is due me for two years, yet they are still "reviewing the situation." Has anyone heard anything at all?

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  15. I have been in contact with AB Data and the office overseeing the distribution at the SEC every six months for the past two years. AB Data continually says they are awaiting SEC approval of the distribution. The SEC however hasn't always agreed with AB Data's assessment. As of April 2016, it does appear that the SEC is in the process of approving the final distribution. One caveat, the lawyer at the SEC I speak with is VERY careful about what she says and will not confirm anything straight out. There is still no timetable for final approval or distribution that the SEC or AB Data will divulge.

    I can only say that both AB Data and the SEC have expressed their displeasure with the delay as this is not a particularly difficult distribution. Neither will place blame on the other.

    Value Line itself is not involved in the distribution in any manner. Their responsibility ended when they provided the settlement money to AB Data.

    It is unfortunate that this settlement was overseen by the SEC. If it had gone to court we would have had a judge overseeing the whole process with the ability to put pressure on both parties. As it stands now, there is nothing we can do but wait.

    One final thought, I wonder how mutual fund companies and other investment firms that hold the funds involved in the settlement will distribute the settlement money to individuals. If you own the funds outright it's a simple process, but what if ownership was through a third party? Are they even aware of the class action?

    PS - I HOPE that the distribution covers my time and expenses to submit all the data required in the proper format.

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  16. Waiting for SEC Approval

    I spoke with both AB Data and the SEC this week. It sounds like progress is actually being made and though no one would give any specifics, the impression I got was that the distribution schedule has been given high priority and an end may actually be in sight.

    I wouldn't spend my distribution yet, but it seems to be getting some much needed attention.

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  17. It appears that the SEC and AB Data have completed the distribution calculations...

    "On December 14, 2016, the Securities and Exchange Commission issued an Order Directing Disbursement of Fair Fund and Vacating Prior Order of Disbursement (the “Order”). The Order is available to view and download on the Case Documents page of this website. Preparation for the Disbursement is in progress and payments are expected to be issued by the end of January, 2017. Thank you for your continued patience with this process."

    Now, can someone tell me why the original distribution fund as defined in the Final Plan for Distribution was $43.7M while the Order Directing Disbursement is distribution only $19.7M? What happened to almost $24M?

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    1. It appears any left over money after everybody has been paid will go to the US Treasury. Part of the original fund was a $10,000,000 civil penalty (in additional to the amount diverted improperly and interest on that amount). And I expect some eligible claimants didn't file claims for various reasons. I don't think it was ever expected that the entire amount would be paid out.

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  18. Has anyone received any funds from this class action suit?? It is now mid February and I have not received any notice.

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    1. The Order is available to view and download on the Case Documents page of this website. Preparation for the Disbursement is in progress and payments are expected to be issued in February, 2017. Thank you for your continued patience with this process.

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  19. Well folks....it is very near the end of February and nothing? Originally the payout was to be January. Wonder what the excuse will be now?

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  20. It's now March 2, and we're being told that disbursement will occur in March 2017. This process has been totally unacceptable !!!!!!!

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  21. Yesterday, my contact at AB Data said that the checks will go out either Monday March 27th or Tuesday the 28th!

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  22. I'll believe it when I see it. Given the history, what makes you think your contact meant 2017? :-)

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    1. I understand. This has been like Lucy teasing Charlie Brown with the football. Call AB Data tomorrow and see if you get the same answer I did. My contact was very specific about the checks going out tomorrow or Tuesday.

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  23. According to the update on the Value Line site, payment was mailed today - Wednesday the 29th. Could our five year wait be over?

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  24. Now, what if you are not happy with the amount of money you receive? And how do we know what is "fair" without access to the entire list and payout schedule?

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    1. I believe everybody's payment will be determined by the same formula. Basically there will be a bunch of multipliers c for each fund and calendar quarter over the period (1988-2006) and your award will be the sum of the amount you had in each fund at the end of each quarter times the appropriate multiplier.

      I don't know the values of the multipliers but we can roughly estimate as follows. The amount diverted (and interest) seems to be about $2 million per year (for 18 years amounting to about $36 million total). If we assume the funds in question had about $2 billion in assets under management (AUM) then the c's (multipliers) will be about .00025 (per quarter) corresponding to about .001 (or one part in 1000) per year. (Since $2 million is .001 of $2 billion.) Of course the exact values of the c values will vary depending on the fund and the calendar quarter.

      But assume .001 per year. Then if you had $10000 in the funds for 5 years your award would be 5*.001*10000 = $50.
      Similarly for other cases.

      If the AUM were only $1 billion over the period then the multipliers would be higher approximately .002 per year. So in the above example the award would twice as much, $100.

      Of course in reality the multipliers will not all be the same but the above gives a rough idea of what I expect the awards to be. We will know soon if I was correct.

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  25. I received my payment check today, Saturday April 1, 2017. Since it came to my work address (which I was not expecting) it may actually have arrived earlier. The amount was about what I was expecting. Part of it was designated as interest but other than that no detailed explanation was provided as to how it was computed . I had money in 2 different Value Line Funds but was not told how much of the award was for each fund (what it appears I might need to know to do my taxes properly). I don't see any easy way of checking that the award amount was computed correctly and since it was roughly in line with what I was expecting I probably won't pursue this further.

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    1. I received mine and my wife's payment checks today.

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  26. This comment has been removed by the author.

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  27. Thanks for all the information you supplied and keeping us updated on the settlement.

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  28. I received a check today for $60.48 made out to wrong person, my address, or maybe right person, wrong address! I must have registered for the settlement at some point, but not my name on this check

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    1. That is interesting. I mentioned above that I was surprised to receive my check at my work address. I thought at the time that I must have changed my address with them to my work address (since there was a period of time after I started my new job when I knew was going to move but didn't know where) and then forgotten I had done that. But when I checked my records I found I had changed my address from my old home address to my new home address and the Value Line Fair Fund had acknowledged this.

      I called on Monday to ask about this and the woman on the help line had a record of my old home address and my new home address but not of my work address and had no idea why or how my check was sent to my work address. The thing I can think of is that in the summer of 2015 I was traveling and had my mail forwarded to my work address (as the post office will only hold mail for 30 days). When I got back I resumed delivery to my home address but perhaps somehow the Fund got the first change but not the second.

      I also asked how the settlement amount should be allocated between the two funds I owned. The woman was unable to immediately answer but said somebody would get back to me in 3 days. However I have not heard anything since (which I guess considering their track record isn't really a surprise).

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    2. I finally got an answer to my question about how my settlement amount should be allocated between the two funds I owned. After many fruitless calls to the help line I was finally instructed to send an email with my question to their email help address. This produced an immediate reply with an attached spreadsheet breaking down my settlement amount by fund and year.

      I estimated above that the awards would be about .001 of the fund value per year. This was about right for the Value Line Fund (.001040) but a bit high for the Value Line Income and Growth Fund (.000753). These are averages, the yearly ratios were quite variable.

      The awards for 1986 were multiplied by 2.79 to account for interest but this didn't actually make me whole because the Value Line Fund (with all distributions reinvested) increased in value by a factor of 5 from 1986 to 2004 and the Value Income and Growth Fund increased in value by a factor of 6.

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  29. I received a check today, and I have no idea what this is for. I don't know what brokerage account, or when. Any ideas? I guess I should just be happy to get my share.

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    1. These awards were for people who owned shares in one or more of several Value Line Mutual Funds between 1986 and 2004. They were to compensate for excessive fees charged by the funds as determined by a 2009 settlement with the SEC. Claims were due in 2011, if you don't remember filing a claim perhaps one was filed on your behalf if you held the shares in a brokerage account.

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  30. Just received my check written to a name I haven't used in 25 years, divorced remarried and divorced again since the account was closed. Is it worth digging out the divorce decree to prove who I am for less than $15.

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    1. I probably would because I am kind of pigheaded about things like that but it is up to you of course. You might see if the bank would waive the paperwork since they aren't risking much.

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  31. I received a check today for 53.55 and had no memory of ever filing but I must have. I was just checking online to see if it was a scam and am happy to see it is legit.

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