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Rating:SEC Smites Pimco For $20MM Over BOND Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, December 02, 2016

SEC Smites Pimco For $20MM Over BOND

News summary by MFWire's editors

The SEC is Grossed out (pun intended) by the Pimco Total Return ETF [profile] (BOND), and the price tag on that reaction is $20 million.

Daniel Ivascyn
PIMCO
Group Chief Investment Officer
Yesterday the regulatory agency unveiled a settlement with the Newport Beach, California-based fixed income asset management titan. The SEC accuses the Pimco folk of messing up the NAV of the famous ETF in the four months after it launched in 2012. Though Pimco consented to the SEC order, they didn't admit or deny the findings.

The news was picked up by a host of publications, including: ETF.com, InvestmentNews, MarketWatch, the New York Post, the Orange County Register, P&I, Reuters, and the Wall Street Journal.

"PIMCO misled investors about the true long-term impact of its odd lot strategy," states Andrew Ceresney, director of the SEC's division of enforcement. "PIMCO overstated its NAV almost every day for four months because its policies and procedures were not reasonably designed to properly address issues concerning odd lot pricing."

Pimco issued its own fact-sheet about the settlement. Among other points, Pimco notes that "the settlement applies to PIMCO only, not its employees, and the SEC made no finding of intentional conduct." Pimco also highlights the fact that the fund valuation issue was specifically around "43 non-agency MBS [mortgage-backed securities] positions," which Pimco says were "a bargain in 2012."

The SEC ordered Pimco to pay an $18.3-million penalty and disgorge about $1.3 million in fees, plus $198,000 in interest. Pimco will also "retain an independent compliance consultant."

This SEC investigation (into Pimco's fund accounting practices for BOND) has been in the public eye for more than two years. News of the investigation broke in September 2014, days before star Pimco co-founder Bill Gross infamously jumped ship for Janus. Gross PMed BOND prior to leaving Pimco, running it as a kind of ETF version (with some variations) of Pimco's giant flagship Total Return Fund, which Gross also ran.

Then in August 2015 Pimco revealed receipt of an SEC Wells Notice over the matter.

BOND now has $2.33 billion in AUM and a four-star rating from M*. 

Edited by: Neil Anderson, Managing Editor


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