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ARTICLE · 04 SEPTEMBER 2015

SEC Issues Wells Notice To Pimco Over Fund Valuations

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At issue here are the fund's performance disclosures from February 29, 2012, to June 30, 2012, and whether they contained an improper valuation of the ETF fund.

United StatesFinance and Banking
Samantha E. Thompson
Samantha E. Thompson

On Monday, August 3, 2015, Pacific Investment Management Co. LLC (Pimco) announced that it had received a Wells notice from the Securities and Exchange Commission concerning the valuation of certain nonagency mortgage-backed securities in its popular, exchange-traded Pimco Total Return ETF fund. The notice indicated that the SEC staff had made a preliminary determination to recommend that the SEC commence a civil action against PIMCO stemming from a nonpublic investigation relating to the fund.

At issue here are the fund's performance disclosures from February 29, 2012, to June 30, 2012, and whether they contained an improper valuation of the ETF fund. The SEC has been investigating whether the fund bought these investments at discounted prices, but relied on higher valuations for the investments when the fund calculated the value of its holdings thereafter. The SEC also is likely looking at whether investors were given inaccurate information about the fund's

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