Pimco could face SEC action over bond ETF

The Pimco Total Return Energetic ETF, a trade-traded account formerly handled by celebrity buyer Bill Gross, continues to be under analysis from the Investments and Exchange Commission for atleast annually for allegedly artificially improving results from its trading of particular mortgage securities, The Wall Street Log first documented in September 2014. It is a notice, however, which indicates that the SEC’s staff will likely recommend the agency bring some action against a firm.

Pimco said it will have an opportunity to demonstrate to the SEC why it believes its actions were appropriate and standard for its industry, and that regulators shouldn’t take any action against it.

The SEC is not formally accusing Pimco or the Pimco Total Return Active Exchange-Traded Fund of wrongdoing.

A spokesman for the SEC declined to comment.

The SEC is eyeing whether the ETF – which mirrors the flagship bond fund that…

The strong performance helped attract investors. It had outflows of $US1.2 billion in 2014, according to Morningstar. Gross invested atleast each day being questioned by SEC authorities although he was at Pimco, the Record noted.

Chris Flood atFinancial Times reported that the probe pivots on whether Pimco “bought bonds for its Total Return ETF at one price and then used higher valuations when subsequently calculating the values of its holdings, providing a boost to its performance”.

Those actions could make it seem like the ETF had realized quick gains when it was in fact taking advantage of variations in the way some investments are valued in the bond market.

Pimco, with $US1.52 trillion in assets under management, is a unit of German insurer Allianz SE.