(RTTNews) -  Investment adviser Value Line, Inc. (VALU: News ), its chief executive officer and former chief compliance officer on Wednesday agreed to pay about $45 million to settle regulators' allegations that the company charged more than $24 million in bogus brokerage commissions on mutual fund trades funneled through Value Line's affiliated brokerage Value Line Securities Inc.

Value Line also announced the resignation of its CEO Jean Buttner, and said that chief legal officer Howard Brecher has been named acting chairman and acting CEO.

The New York-based company said that the Securities and Exchange Commission, or SEC, has approved the company's proposed settlement regarding the investigation by the SEC into commissions paid by nine Value Line equity mutual funds to Value Line Securities from 1986 through November 2004.

According to Value Line, the affiliated brokerage revenue comprised less than 1-1/2% of Value Line's total revenue during that period. Further, Value Line said its management ended the affiliated brokerage practice in 2004.

Value Line had proposed the settlement in September to avoid costly and protracted litigation. The company is well known in financial circles for its analytical publications and also oversees mutual funds.

Value Line said that the company as well as its CEO Buttner and former Chief Compliance officer David Henigson neither admit nor deny the findings of the investigation. Further, the company said it has restructured its investment management subsidiary and brokerage relationships and is confident that they conform to applicable regulatory requirements.
Separately, the SEC said that Value Line, Buttner, Henigson, and Value Line Securities agreed to settle the SEC's charges by consenting to pay nearly $45 million in monetary remedies, including civil penalties. The SEC also said that Buttner and Henigson are also barred from working with any brokerage or investment adviser, or as officers or directors of any public company.

The SEC said that from 1986 to November 2004, Value Line, while serving as investment adviser to the Value Line funds, directed a portion of the funds' securities trades to Value Line Securities through its so-called "commission recapture program." Value Line arranged for one of three unaffiliated brokers to execute, clear and settle the funds' trades at a discounted commission rate of $.02 to $.01 per share.

Instead of passing the discount on to the funds, Value Line had the unaffiliated brokers bill the funds $.0488 per share and then "rebate" $.0288 to $.0388 per share to Value Line Securities, the SEC said. In total, Value Line Securities received over $24 million in bogus brokerage commissions from the funds pursuant to this scheme, as Value Line Securities did not perform, the SEC noted.

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