SEC Charges PIMCO for Disclosure and Policies and Procedures Failures

The Securities and Exchange Commission (SEC) revealed that Pacific Investment Management Company LLC (PIMCO), a registered investment adviser, has agreed to a $9 million settlement concerning two enforcement actions. These actions pertain to violations associated with disclosure and policies, as well as procedures involving two funds advised by PIMCO.

In the initial enforcement action, the SEC determined that between September 2014 and August 2016, PIMCO did not provide necessary information to investors about the application of interest rate swaps by the PIMCO Global StocksPLUS & Income Fund (PGP), and the substantial influence of these swaps on PGP’s dividend.

In the subsequent enforcement action, the SEC concluded that PIMCO neglected to waive approximately $27 million of advisory fees from April 2011 to November 2017, which was required by its agreement with the PIMCO All Asset All Authority Fund. Further, until at least 2018, PIMCO lacked appropriate written policies and procedures relating to its supervision of advisory fee calculations and relevant fee waivers. PIMCO has since distributed the $27 million in fees that were meant to be waived to its investors, along with interest and a performance adjustment.

Corey Schuster, Co-Chief of the Enforcement Division’s Asset Management Unit, emphasized the SEC’s ongoing dedication to ensuring firms adhere to appropriate disclosure of critical information and the implementation of sound policies and procedures. He pointed out that PIMCO fell short on both these fundamental responsibilities.

The SEC’s order concerning PGP found that PIMCO contravened 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 regarding the Authority Fund, the SEC’s order revealed that PIMCO violated Section 206(4) of the Advisers Act and Rule 206(4)-7. PIMCO has agreed to a cease-and-desist order and a censure in each action, and to pay an aggregate penalty of $9 million, without admitting or denying the SEC’s findings.

The SEC’s inquiries were managed by Ronnie Lasky and Manuel Vazquez, under the guidance of Brent Wilner from the Enforcement Division’s Asset Management Unit, and Gary Leung, Regional Trial Counsel, all based in the Los Angeles Regional Office. The PGP investigation was further aided by Brian Fitzpatrick of the Asset Management Unit and Dennis Hamilton and Raymond Wolff from the Division of Economic Risk and Analysis. The examination leading to the PGP investigation was carried out by Daniel Jung, Nicholas Mead, Dinah Touny, and Melissa Romic from the SEC’s Los Angeles Regional Office.