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Money Management Executive

PIMCO Units in Directed Brokerage Charge

September 16, 2004, 1:00 a.m. EDT 1 Min Read

The SEC and California Attorney General Bill Lockyer have fined two PIMCO investment advisors and its distributor a total of $20.6 million for failing to disclose how they directed trades to 50 broker/dealers between 2000 and 2003 to defray shelf space costs. The funds in question were the PIMCO Multi-Manager Series funds. The SEC fined the three entities $11.6 million, while the California Attorney General fined the distributor $9 million.

Those named in the suits are PA Fund Management (the investment advisor), PEA Capital (the sub-advisor) and PA Distributors (the underwriter and distributor).

Stephen M. Cutler, director of the SEC's division of enforcement, stated, "An investment advisor's undisclosed use of mutual fund assets to defray the adviser's, or an affiliated distributor's, own marketing expenses is a breach of the adviser's duty. Our action today – like the action brought by the Commission against Massachusetts Financial Services some six months ago – demonstrates the Commission's resolve to ensure that mutual fund shareholders know how their money is being spent."

For Lockyer, the case is the first enforcement action he has taken against a mutual fund firm using a law he sponsored expanding his authority in securities fraud cases. The law took effect on Jan. 1.

PIMCO consented to the charges without admitting or denying their findings.

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