U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18697 / May 6, 2004
SEC v. PIMCO Advisors Fund Management LLC, PIMCO Advisors Fund Management LLC, PEA Capital LLC f/k/a/ PIMCO Equity Advisors LLC, PIMCO Advisors Distributors LLC, Stephen J. Treadway, and Kenneth W. Corba (U.S. District Court for the Southern District of New York, Civil Action No. 04 CIV. 3464 (VM))
SEC FILES CIVIL FRAUD CHARGES AGAINST THE PIMCO EQUITY FUNDS' MUTUAL FUND ADVISERS, DISTRIBUTOR, CEO AND CHAIRMAN OF THE BOARD OF TRUSTEES, AND A PORTFOLIO MANAGER FOR UNDISCLOSED MARKET TIMING ARRANGEMENT
The Securities and Exchange Commission today filed a complaint in United States District Court seeking injunctive and other relief against PIMCO Advisors Fund Management LLC (PAFM), PEA Capital LLC (PEA), PIMCO Advisors Distributors LLC (PAD), Stephen J. Treadway, the chief executive officer of PAFM and PAD as well as the chairman of the board of trustees for the PIMCO Funds: Multi-Manager Series, and Kenneth W. Corba, PEA's former CEO, alleging violations of the antifraud and other provisions of the federal securities laws in defrauding PIMCO mutual fund investors, in connection with an undisclosed market timing arrangement with Canary Capital Partners LLC. According to the complaint, from February 2002 to April 2003, Canary engaged in approximately 108 round-trip exchanges in an aggregate amount of over $4 billion in several PIMCO Funds pursuant to its special market timing arrangement.
PAFM is an investment adviser for the PIMCO Funds: Multi-Manager Series, PEA is the investment sub-adviser for several of the PIMCO Funds, and PAD is a broker-dealer that serves as the distributor for the PIMCO Funds.
The Commission's complaint, filed in United States District Court in Manhattan, alleges as follows.
PAFM, PEA, PAD, Treadway, and Corba are charged with violating, or aiding and abetting violations of, the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. PAFM, PEA, Treadway, and Corba are further charged with violations of Section 34(b) of the Investment Company Act of 1940 for making false and misleading portfolio disclosures. PAFM, PEA, and PAD are also charged with violating Section 17(d) of the Investment Company Act and Rule 17d-1 thereunder for participating in joint transactions raising a conflict of interest. Finally, PAFM and PEA are charged with violations of Section 204A of the Advisers Act for failing to have written policies to prevent the disclosure of nonpublic portfolio holdings to Canary's brokers and others.
The Commission is seeking injunctive relief, disgorgement, monetary penalties, and an order pursuant to Section 36(a) of the Investment Company Act preventing the defendants from serving as investment advisers, principal underwriters, officers, directors, or members of any advisory boards to any registered investment company.