Trouble has been brewing at Pacific Investment Management Company, LLC (PIMCO) for some time, and investors have taken notice. PIMCO is one of the largest asset managers in the world, with over $1.9 trillion in assets under management. While the PIMCO Total Return Bond Fund is the largest bond fund in the world, the firm also offers asset management services across real assets, private equity, and global equities.
Investor Concerns at PIMCO
Money Market Reform
Money market funds (“MMFs”) act as a secure and liquid cash management vehicle for retail and institutional investors. MMFs enable investors to gain access to higher returns than interest-bearing bank accounts while providing principal stability and liquidity. They have proven to be very popular amongst investors, garnering over $2.5 trillion in assets.
Constitutionality of the SEC’s Growing Administrative Forum
The Securities and Exchange Commission (“SEC”) is increasingly favoring the administrative process over the court system for prosecuting securities cases, likely as a result of expanded powers included in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. For example, in the administrative forum, the SEC now has the authority to prosecute all individuals – even those not associated with regulated entities – and can impose more fines than it could before. Russell Ryan, a partner at King & Spalding in Washington, pointed out that the SEC obtained a record $3.4 billion in monetary sanctions in 2013 and continues to bring multi-million dollar actions. Notably, the SEC recently added two administrative law judges to its staff, increasing the number of judges from three to five. Furthermore, in June, Enforcement Director Andrew Ceresney announced that the SEC will bring more insider trading actions through administrative proceedings.
S.E.C. Tightens Regulations on Asset-Backed Securities
The Securities and Exchange Commission (“S.E.C.”) adopted new rules on August 27 that increase disclosure requirements for issuers of asset-backed securities and establish new safeguards against conflicts-of-interest in the credit rating process. The rules implement reforms mandated by the Dodd-Frank Act, which Congress passed in 2010 to address the systemic issues at the root of the financial crisis. (more…)
SEC Adopts Money Market Fund Reform Rules
The Securities and Exchange Commission announced recently that they have adopted amendments to the rules that govern money market mutual funds. These amendments are intended to make structural and operational reforms to address the risk of investor runs in money market funds, while preserving the benefits of the funds.
The SEC is looking to prevent another disaster similar to the 2008 financial meltdown, where there was an investor exodus out of money-market mutual funds.
SEC Staff Provides Guidance on Custody Rule Compliance When Private Funds Use SPVs and Escrow Accounts
The staff of the SEC’s Division of Investment Management issued IM Guidance Update No. 2014-7 (the “Guidance Update”) to provide guidance on how Rule 206(4)-2 under the Investment Advisers Act of 1940 (the “Custody Rule”) applies when private pooled investment vehicles (“private funds”) use special purpose vehicles (“SPVs”) to own one or more assets or use escrow accounts in connection with the sale of a portfolio company.
SEC’s MCDC Initiative – The Clock is Ticking
Not-for-profit health care providers that have borrowed on a tax-exempt basis within the last five years should be aware of the Securities and Exchange Commission’s (SEC) Municipalities Continuing Disclosure Cooperation (“MCDC”) Initiative. The MCDC Initiative applies to municipal issuers and obligated persons, such as tax-exempt hospital borrowers, that provided materially misleading disclosure in Official Statements issued within the past five years regarding compliance with their continuing disclosure obligations under SEC Rule 15c2-12. The SEC is offering to enter into settlements pursuant to which such borrowers neither admit nor deny wrongdoing, but agree to a cease and desist order against future misleading disclosure and agree to certain undertakings, such as remedying all past disclosure failures, cooperating with subsequent SEC investigations, disclosing the settlement terms for five years in Official Statements, and establishing training programs regarding continuing disclosure obligations. However, the MCDC Initiative expires on September 10, 2014. After that date, the SEC has indicated that penalties for such misleading disclosure are likely to be more severe and may include fines.
SEC Suspends CYNK After Shocking Stock Valuation
Last week, the financial world goggled in astonishment at the meteoric rise in the CYNK Technology Corp stock. Cynk, a supposed social-networking company, is a business which appears to have one employee, large losses, no turnover, and no assets. However, what Cynk does have is a $4.5 billion stock market valuation: numbers that clearly don’t add up to the baffled financial world.
SEC Adopts Security-Based Swap Cross-Border Definitional Rule
On June 25, the SEC adopted the first in a series of rules governing the cross-border reach of its security-based swap regulatory regime. The rules define the term “U.S. person” and provide the test for counting cross-border security-based swap transactions to determine whether a firm must register as a security-based swap dealer or a major security-based swap participant. The final rules also provide a process by which market participants or non-U.S. regulators can request that the SEC make a determination that a foreign regime’s security-based swap rules are comparable to the SEC’s, thereby permitting market participants in that jurisdiction to meet SEC rules through compliance with local law. Finally, the rules provide clarification of the SEC’s view of the cross-border application of its anti-fraud authority for all securities.
Read the rest of the article here.
SEC Adopts Security-Based Swap Cross-Border Definitional Rule
On June 25, the SEC adopted the first in a series of rules governing the cross-border reach of its security-based swap regulatory regime. The rules define the term “U.S. person” and provide the test for counting cross-border security-based swap transactions to determine whether a firm must register as a security-based swap dealer or a major security-based swap participant. The final rules also provide a process by which market participants or non-U.S. regulators can request that the SEC make a determination that a foreign regime’s security-based swap rules are comparable to the SEC’s, thereby permitting market participants in that jurisdiction to meet SEC rules through compliance with local law. Finally, the rules provide clarification of the SEC’s view of the cross-border application of its anti-fraud authority for all securities.