In the Matter of Allianz Global Investors U.S. LLC Admin. Proc. File No. 3-20855
Feb. 6, 2023
On May 17, 2022, the Commission instituted and simultaneously settled an administrative and cease-and-desist proceeding (the “Order”) against Allianz Global Investors U.S. LLC (“AGI US” or “Respondent”). In the Order, the Commission found that AGI US employed a complex options trading strategy known as Structured Alpha that AGI US marketed and sold to investors in various funds (“Structured Alpha Funds”). The Structured Alpha Funds were intended to generate profits by using a portfolio of debt or equity securities as collateral to purchase and sell options principally on the S&P 500 Index. The Structured Alpha Funds performed well until the COVID-related market volatility in March 2020 when they suffered catastrophic losses, including losses in excess of 90% in certain funds. Beginning on or before January 2016, and continuing through March 2020, AGI US, through the Structured Alpha portfolio management team, misled investors as to the significant downside risk of the Structured Alpha Funds, which included misrepresentations and omissions made in connection with the purchase and sale of these securities. The Commission ordered the Respondent to pay a $675,000,000.00 civil money penalty. The Commission also created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalty paid can be distributed to harmed investors (the “Fair Fund”). See the Commission’s Order: Release No. 34-94927.
In accordance with the Order, the Respondent paid $131,314,739.08 directly to certain investors and the remaining $543,685,260.92 to the Commission. The monies paid to the Commission comprise the Fair Fund and have been deposited in an interest-bearing account at the U.S. Department of the Treasury’s Bureau of the Fiscal Service. Any interest accrued will be added to the Fair Fund.
On August 4, 2022, the Commission issued an order appointing Miller Kaplan Arase LLP, as the Tax Administrator of the Fair Fund. See the Commission’s Order: Release No. 34-95429.
On September 16, 2022, the Commission issued an order appointing Epiq Class Action & Claims Solutions, Inc., as the Fund Administrator to oversee the administration and distribution of the Fair Fund and, set the administrator’s bond amount. See the Commission’s Order: Release No. 34-95801.
On May 22, 2023, the Commission published a notice of the proposed plan of distribution and opportunity for comment and simultaneously published the proposed plan of distribution (“Proposed Plan”). The notice provides the public with 30 days to submit their comments on the Proposed Plan. See the Commission’s Notice: Release No. 34-97540 and the Proposed Plan.
The Proposed Plan provides that the distribution of the Fair Fund shall be made to those investors who held mutual funds or UCITS funds, where AGI US employed the Structured Alpha options trading strategy, between February 24, 2020 and March 30, 2020, inclusive, and suffered a principal loss, as calculated by the methodology used in the plan of allocation in the Proposed Plan.
Three comments were received on the Proposed Plan during the 30-day comment period. On July 18, 2023, the Commission issued an order extending the time to enter an order approving or disapproving the plan of distribution to December 31, 2023 to allow for further evaluation and analysis to properly address the comment. See the Commission’s Order: Release No.34-97930.
For more information, please contact the Commission:
Office of Distributions