SEC Charges PIMCO for Disclosure and Policies and Procedures Failures
The Securities and Exchange Commission today announced that registered investment adviser Pacific Investment Management Company LLC (PIMCO) will pay $9 million to settle two enforcement actions relating to disclosure and policies and procedures violations involving two funds PIMCO advises.
In the first action, the SEC found that, from September 2014 to August 2016, PIMCO failed to disclose material information to investors concerning the use by PIMCO Global StocksPLUS & Income Fund (PGP) of interest rate swaps and the material impact of the swaps on PGP’s dividend.
In the second action, the SEC found that, from April 2011 to November 2017, PIMCO failed to waive approximately $27 million of advisory fees as required by its agreement with the PIMCO All Asset All Authority Fund. Additionally, until at least 2018, PIMCO did not have adequate written policies and procedures concerning its oversight of advisory fee calculations and related fee waivers. PIMCO has since disbursed to investors the $27 million in fees that should have been waived, plus interest and a performance adjustment.
“These cases highlight our continued focus on ensuring that firms adequately disclose material information and implement reasonably designed policies and procedures,” said Corey Schuster, Co-Chief of the Enforcement Division’s Asset Management Unit. “PIMCO failed to comply with both of these critical obligations.”
In the action concerning PGP, the SEC’s order finds that PIMCO violated Section 206(4) of the Advisers Act and Rule 206(4)-8 and Section 34(b) of the Investment Company Act of 1940. In the action concerning Authority Fund, the SEC’s order finds that PIMCO violated Section 206(4) of the Advisers Act and Rule 206(4)-7. Without admitting or denying the SEC’s findings, PIMCO agreed to a cease-and-desist order and a censure in each action and to pay a combined $9 million penalty.
The SEC’s investigations were conducted by Ronnie Lasky and Manuel Vazquez under the supervision of Brent Wilner with the Enforcement Division’s Asset Management Unit and Gary Leung, Regional Trial Counsel, all in the Los Angeles Regional Office. Brian Fitzpatrick of the Asset Management Unit and Dennis Hamilton and Raymond Wolff of the Division of Economic Risk and Analysis assisted with the PGP investigation. The examination that led to the PGP investigation was conducted by Daniel Jung, Nicholas Mead, Dinah Touny, and Melissa Romic of the SEC’s Los Angeles Regional Office.