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Regulation and Compliance > Federal Regulation > SEC

Pimco Units Settle Charges By SEC, California

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Sept. 15, 2004 — Three units of Pimco will pay about $21 million to settle federal and state charges that they failed to properly disclose payments made to brokers for selling Pimco funds.

The companies — PA Fund Management LLC, PEA Capital LLC and PA Distributors LLC, all units of German insurer Allianz AG ADS (AZ) — will pay $11.6 million to settle with the Securities and Exchange Commission. Separately, the firms will pay $9 million in a settlement with the California attorney general.

The settlement come two days after the affiliates agreed to pay $50 million to settle charges by the SEC that they defrauded investors by permitting rapid trading in mutual fund shares. In June, the affiliates agreed to pay $18 million to settle charges of improper trading brought by the attorney general of New Jersey.

Regulators said the companies failed to adequately disclose so-called “shelf space” arrangements in which the units directed stock trades to brokerage houses to reward them for selling Pimco funds.

The SEC said the companies entered into the arrangements with more than 50 broker-dealers between 2000 and 2003. California regulators said PA Distributors paid broker-dealers about $79 million under the arrangements, from January 2000 “through the present.”

The companies neither admitted or denied wrongdoing under the SEC settlement. That settlement requires the companies to return about $6.6 million to shareholders and to pay penalties of $5 million. Under the California pact, the units will pay $5 million in penalties and $4 million to cover costs associated with the state’s legal action. The companies, also agreed to take steps to take steps to improve their compliance and disclosure.

Contact Bob Keane with questions or comments at: [email protected].


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