Value Line arranged for unaffiliated brokers to execute the trades at a discounted commission rate of a penny or two per share. But rather than passing the discount on to the mutual funds, the SEC said, Value Line had the outside brokers bill the funds 0.048 cents per share and then "rebate" 0.028 cents to 0.038 cents a share to Value Line Securities.

Altogether, Value Line Securities received more than $24 million in phony brokerage commissions in this scheme while not performing any real brokerage services for the funds on those trades, according to the SEC. Value Line falsely advised the funds' independent directors and shareholders that Value Line Securities provided genuine brokerage services for the commissions it received, the agency said.

"Value Line misappropriated millions of dollars from the mutual funds they managed by artificially allocating fund trades and then charging the funds for phantom brokerage services," SEC Enforcement Director Robert Khuzami said. "Such blatant wrongdoing will not be tolerated."

Value Line said in a statement that the brokerage fees in question comprised less than 1.5 percent of its total revenue during the period. Management ended Value Line's associated brokerage practice in 2004, the statement said.
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