Pacific Investment Management Co. said that the SEC has sent it a Wells notice indicating that its staff is recommending that the regulator file a civil case against the financial firm over the way securities were marked in its PimcoTotal Return Active Exchange-Traded Fund. That\u2019s the ETF version of Pimco\u2019s Total Return Fund. <\/p>\n
The Wells notice is related to the valuation of smaller positions in mortgage-backed securities that the government did not guarantee for several months in 2012, as well as disclosure regarding performance and procedures and policies related to compliance. Bloomberg reports that according to someone that knows bout the investigation, The regulator has been looking at whether the total return ETF bought small lots of bonds at a discount price and marked them up when valuing holdings to artificially inflate returns.<\/p>\n
Although the ETF has continued to see deposits, the Total Return mutual fund experienced redemptions, especially after the departure of founder Bill Gross last year. News of his exit came within days of the news that the SEC was probing whether Pimco had inflated ETF returns.<\/p>\n