The New Jersey attorney general filed civil fraud charges against investment advisers for Pimco Funds, the nation’s fifth-largest mutual fund group, alleging that investors were hurt because the company allowed improper short-term trading of its bond and stock funds.
Pimco Funds disclosed last week it had been notified by the Securities and Exchange Commission that it was likely to face charges for allowing a New Jersey hedge fund, Canary Capital Partners LLC, to conduct rapid trading in shares of Pimco stock funds run by PEA Capital LLC for a period of several months.
Also charged in the case was Pacific Investment Management Co., or Pimco, the massive bond shop based in Newport Beach, Calif., which has about $370 billion in assets under management. Both PEA and Pacific Investment Management are units of German insurer Allianz AG ADS (AZ).
In a statement yesterday, the independent trustees of the Pimco funds said New York-based PEA would repay the funds affected $1.6 million for harm caused by the trading known as market timing.