The Securities and Exchange Commission has initiated administrative and cease-and-desist proceedings against Pacific Investment Management Company LLC (PIMCO) for failing to accurately waive certain advisory fees consistent with its agreement with the All Asset All Authority Fund (Authority Fund). PIMCO, a registered investment adviser, failed to waive approximately $27 million of the Authority Fund’s advisory fees over a period of over six years due to an error in a formula created and provided to its sub-administrator to calculate the fee waiver amount. The Commission finds that PIMCO’s sub-administrator discovered and notified the error in December 2017, and in July 2018, PIMCO implemented a remediation plan to reimburse the Authority Fund’s shareholders over $30 million in unwaived fees, lost performance, and interest. PIMCO did not have reasonably designed policies and procedures in place to prevent violations of the Advisers Act and the rules thereunder relating to its oversight of the advisory fee calculations and related fee waivers in violation of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. PIMCO was found guilty of violating Section 206(4) of the Advisers Act and Rule 206(4)-7 by willfully violating Section 206(4) of the Advisers Act and Rule 206(4)-7.
The Commission ordered PIMCO to cease and desist from committing or causing future violations of the Act and to pay a civil money penalty of $2,500,000 to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury. PIMCO was also ordered to pay a penalty offset of $37 million in performance adjustment to the Authority Fund. The Commission deemed it appropriate and in the public interest to impose the sanctions agreed to in the Offer. PIMCO was censured and must pay the penalty offset within 10 days of the order.