Morningstar staked out a profitable niche scrutinizing the performance of asset managers. Now its own practices are under the microscope, and depending on what Eliot Spitzer finds, the Chicago company's plans to go public could be affected.

"Historically, investors want this type of regulatory uncertainty resolved before the company goes public," says David Menlow, president of IPOfinancial Network. "An overhang of this nature can be disconcerting to investors."

Morningstar announced this week that it received a request from the New York attorney general's office seeking information related to an investigation that appears to be aimed at determining how its consulting practice, Morningstar Associates, is paid for its retirement-plan work.

"While the request is very broad, it specifically asks for information about the investment consulting services we offer to retirement plan providers, including fund lineup recommendations for retirement-plan sponsors," the company said in a statement.

Morningstar Associates helps design 401(k) retirement plans by recommending mutual funds that it believes would be appropriate investment choices for a particular company's employee base.

The company vowed to cooperate with Spitzer in a statement, saying it has "always been committed to managing our business with integrity, openness and honesty." CEO Joe Mansueto told the

Chicago Tribune

this week that the company gets no fee that would cause it to favor one fund over another, saying money comes solely from the company for which it is setting up the retirement plan.

Mansueto founded Morningstar in 1984 out of his Chicago apartment. Since then it has grown to provide research on a wide array of investment vehicles, from stocks and mutual funds to variable annuities and so-called 529 college-savings plans. The company tracks more than 100,000 investment offerings and is best known for its use of a five-star rating system on mutual funds.

The Spitzer investigation increases the pressure on Morningstar, which filed for a $100 million public offering last May. The company doesn't break out the revenue its consulting unit books for advising mutual fund companies on their retirement plans.

"The longer the IPO sits in the shadows, the staler it becomes," Menlow said. "This offering has been on the shelf for a while so it needs and adrenaline boost, not a delay."

Mutual fund industry consultant Geoff Boboroff says the Morningstar inquiry is similar to ones that Spitzer has brought upon a number of retirement consultants, and said it most likely will not affect Morningstar's IPO.

"Assuming their denials are accurate, it should not complicate their public offering too much," says Boboroff. "It seems like Spitzer is looking across the industry, and Morningstar was sooner or later going to be named."

Morningstar actually discusses potential conflicts in its IPO prospectus, saying, "The fact that fund companies and other financial institutions pay us for certain products and services may create the perception that our ratings, research and recommendations are not impartial. The perception that we may be subject to a conflict of interest may undermine the confidence of our customers and potential customers in our reputation as a provider of independent research. Any such loss of confidence or damage to our reputation could hurt our business."