There is more coming out of Morningstar about its problem with the SEC. The WSJ is implying that Morningstar did not follow the same open course it is requiring fund firms to follow (the pot calling the kettle black?). Meanwhile, Joe Mansueto expresses his surprise that the SEC is so interested in a mistake in just one of 10,000 products tracked by the fund firm.

Morningstar is planning changes in its fund rating process to ensure it does not repeat the mistakes that the drew attention of the SEC, reports the WSJ. Joe Mansueto, chairman of the fund tracker, revealed the steps in a letter to customers on Friday. The trouble started after the fund tracker reported incorrect performance data for the Rock Canyon Top Flight Fund in February.

Morningstar received a Wells notice from the SEC on May 24. The notice warned that the fund tracker faces a possible civil action related to the problems with the Top Flight fund.

Mansueto also told WSJ reporter Tom Lauricella that he did not inform customers of the SEC probe for five months because Morningstar "was surprised that a single data error could be construed as a securities violation."

"We didn't know -- and still don't know -- where this investigation would lead," Mansueto is quoted as saying. "We thought that once the SEC had all the facts, it would be clear that it was an honest mistake, that no investors were harmed, and there was no intent on our part to mislead investors."

According to the WSJ, the letter stated that: "To prevent a similar problem, and as part of our ongoing effort to continually improve our processes," the firm is "increasing our communication efforts and centralizing lines of reporting for data questions or errors; augmenting the stringent business rules we already have in place; and improving our data-analyst training."  

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