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PIMCO Agrees To Pay $20 Million For Misleading Bond Investors

By Erwin J. Shustak, Esq. of Shustak Reynolds & Partners, P.C. posted on Wednesday, January 25, 2017.

Erwin Shustak, Esq.
619.696.9500 ex. 109
[email protected] 

The Securities and Exchange Commission (“SEC”) announced that PIMCO will pay nearly $20 million to settle charges that it mislead investors about the performance of PIMCO’s Total Return ETF Bond fund, one of its first, actively managed exchange-traded funds. The fund had been run by Bill Gross, PIMCO’s former “bond star” guru.

The Fund’s early successful returns were attributable to buying smaller-sized bonds known as “odd-lots”. But, after that early string of successes, the Fund gave a different reason for the Fund’s success. According to the SEC complaint, PIMCO mislead investors by pricing these “odd-lot” bonds as if they were full lots, despite no reasonable basis for believing the odd-lots could be sold at the same price as the full lot bonds, thereby overstating the value of the bond holdings and the Fund’s returns. The SEC charged that PIMCO “overstated its NAV (net asset value) almost every day for four months because its policies and procedures were not reasonably designed to properly address issues concerning odd-lot pricing”. As part of its settlement with the SEC, PIMCO agreed to hire an independent compliance consultant. 

 Shustak Reynolds & Partners, p.c. focuses in the areas of securities, financial services and complex business disputes. For more information, contact our managing partner, Erwin Shustak. More information is available at www.shufirm.com.

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