Pacific Investment Management Co. agreed to pay $9 million to settle two separate Securities and Exchange Commission charges that it did not disclose material information concerning interest rates swaps, and failed to accurately waive certain advisory fees to a mutual fund it managed.
PIMCO, which had $1.8 trillion in assets under management as of March 31, did not admit to or deny the SEC's findings, but agreed to a cease-and-desist order, a censure and the $9 million penalty, the SEC announced Friday.
From September 2014 to August 2016, PIMCO failed to disclose material information to investors about its use of paired interest rate swaps for PIMCO Global StocksPLUS & Income Fund, a closed-end fund advised by PIMCO, according to an SEC order. The paired interest rate swaps in the fund's portfolio had become a material source of distributable income, which enabled PIMCO to maintain the fund's dividend rate, information which PIMCO did not disclose, an SEC order said.
In a separate order, 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 mutual fund PIMCO All Asset All Authority Fund. The offering is a fund of funds that primarily invests in other PIMCO-managed funds for which PIMCO serves as the investment adviser. PIMCO receives advisory fees from both the Authority Fund and the other PIMCO-managed funds in which the Authority Fund invests, but to limit the administrative expenses, PIMCO contractually agreed to a "fee waiver."
However, while PIMCO did waive a portion of the agreed upon fee waiver amount, from the 2011 to 2017 period it failed to waive approximately $27 million of the Authority Fund's advisory fees due to an error in a formula PIMCO created and provided to its subadministrator to calculate the fee waiver amount, according to the SEC.
"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 SEC's enforcement division's asset management unit, in a news release. "PIMCO failed to comply with both of these critical obligations."
In an email, a PIMCO spokeswoman said, "We are pleased to resolve these matters relating to issues which occurred in two funds more than five years ago, and which PIMCO had fully addressed prior to the SEC's investigations."
