Notice2022-10965
Allianz Global Investors U.S. LLC, et al.; Notice of Application and Temporary Order
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 23, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 99 (Monday, May 23, 2022)</title>
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[Federal Register Volume 87, Number 99 (Monday, May 23, 2022)]
[Notices]
[Pages 31275-31280]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10965]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-34587; File No. 812-15337]
Allianz Global Investors U.S. LLC, et al.; Notice of Application
and Temporary Order
May 17, 2022.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Temporary order and notice of application for a permanent order
under section 9(c) of the Investment Company Act of 1940 (``Act'').
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SUMMARY OF APPLICATION: Applicants have applied for an order exempting
them from section 9(a) of the Act with respect to a guilty plea entered
on May 17, 2022 (``Guilty Plea'') by Allianz Global Investors U.S. LLC
(the ``Pleading Entity'') in the United States District Court for the
Southern District of New York (the ``District Court'') in connection
with a plea agreement (``Plea Agreement'') between the Pleading Entity
and the United States Department of Justice (``DOJ''). The Pleading
Entity has requested a time-limited exemption for the sole purpose of
providing the Pleading Entity with adequate time to transition certain
U.S. registered fund advisory relationships to other service providers
(the ``Time-Limited Exemption''). Upon the expiration of the Time-
Limited Exemption, the Pleading Entity will be disqualified from
engaging in the fund servicing activities identified in section 9(a) of
the Act in accordance with the terms thereof. The PIMCO Applicants and
the Allianz Life Applicants (each as defined below and, collectively,
the ``Continuing Fund Servicing Applicants'') have requested a
temporary exemption from section 9(a) until the Commission takes final
action on an application for a permanent order (the ``Permanent
Order''). The temporary order (as set forth herein, the ``Temporary
Order'' and, together with the Permanent Order, the ``Orders'')
provides a Time-Limited Exemption to the Pleading Entity and a
temporary exemption to the Continuing Fund Servicing Applicants and
other Covered Persons (defined below) pending Commission action on the
Permanent Order. The Permanent Order, if granted, would: (1) If the
order is issued prior to the date that the Time-Limited Exemption would
expire by its terms, reference the Time-Limited Exemption, subject to
expiration at the end of its term,\1\ and (2) provide a permanent
exemption to the Continuing Fund Servicing Applicants and other Covered
Persons.
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\1\ If the Time-Limited Exemption expires by its terms prior to
the issuance of the permanent order, the Time-Limited Exemption will
be omitted from the permanent order.
APPLICANTS: The Pleading Entity, Allianz Investment Management LLC
(``AIM''), Allianz Life Financial Services, LLC (``ALFS''), Allianz
Life Insurance Company of North America (``ALICONA''), Allianz Life
Insurance Company of New York (``ALICONY''), Pacific Investment
Management Company LLC (``PIMCO LLC''), PIMCO Investments LLC (``PIMCO
Investments'' and, collectively with the Pleading Entity, AIM, ALFS,
ALICONA, ALICONY and PIMCO, the ``Fund Servicing Providers''), and,
solely for the purposes of making certain representations and
committing to certain undertakings as set forth in the application,
Allianz SE (``Allianz SE'' and together with its wholly owned
subsidiaries and affiliated entities, ``Allianz''). The term
``Continuing Fund Service Applicants'' refers to, collectively, AIM,
ALFS, ALICONA, ALICONY, PIMCO and PIMCO Investments. The term
``Applicants'' refers to, collectively, Allianz SE, the Pleading
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Entity, and the Continuing Fund Servicing Applicants.
FILING DATE: The application was filed on May 17, 2022.
HEARING OR NOTIFICATION OF HEARING: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by emailing the Commission's
Secretary at <a href="/cdn-cgi/l/email-protection#92c1f7f1e0f7e6f3e0ebe1bfddf4f4fbf1f7d2e1f7f1bcf5fde4"><span class="__cf_email__" data-cfemail="8ddee8eeffe8f9ecfff4fea0c2ebebe4eee8cdfee8eea3eae2fb">[email protected]</span></a> and serving applicants with a
copy of the request, by email. Hearing requests should be received by
the Commission by 5:30 p.m. on June
[[Page 31276]]
13, 2022 and should be accompanied by proof of service on the
applicants, in the form of an affidavit, or for lawyers, a certificate
of service. Pursuant to rule 0-5 under the Act, hearing requests should
state the nature of the writer's interest, any facts bearing upon the
desirability of a hearing on the matter, the reason for the request,
and the issues contested. Persons who wish to be notified of a hearing
may request notification by emailing the Commission's Secretary at
<a href="/cdn-cgi/l/email-protection#31625452435445504348421c7e5757585254714254521f565e47"><span class="__cf_email__" data-cfemail="782b1d1b0a1d0c190a010b55371e1e111b1d380b1d1b561f170e">[email protected]</span></a>.
ADDRESSES: The Commission: <a href="/cdn-cgi/l/email-protection#4417212736213025363d37690b22222d2721043721276a232b32"><span class="__cf_email__" data-cfemail="4f1c2a2c3d2a3b2e3d363c62002929262c2a0f3c2a2c61282039">[email protected]</span></a>. Applicants: John
Viggiano, <a href="/cdn-cgi/l/email-protection#563c393e3878203f31313f37383916373a3a3f37382c313f7835393b"><span class="__cf_email__" data-cfemail="6e040106004018070909070f00012e0f0202070f00140907400d0103">[email protected]</span></a>; Erik T. Nelson,
<a href="/cdn-cgi/l/email-protection#6306110a084d0d060f100c0d23020f0f0a020d190f0a05064d000c0e"><span class="__cf_email__" data-cfemail="2247504b490c4c474e514d4c62434e4e4b434c584e4b44470c414d4f">[email protected]</span></a>; Paul G. Cellupica,
<a href="/cdn-cgi/l/email-protection#25554450490b4640494950554c464465554c48464a0b464a48"><span class="__cf_email__" data-cfemail="8cfcedf9e0a2efe9e0e0f9fce5efedccfce5e1efe3a2efe3e1">[email protected]</span></a>; Frederick Wertheim, <a href="/cdn-cgi/l/email-protection#21764453554944484c676152544d4d42534e4c0f424e4c"><span class="__cf_email__" data-cfemail="792e1c0b0d111c10143f390a0c15151a0b1614571a1614">[email protected]</span></a>;
and Wendy M. Goldberg, <a href="/cdn-cgi/l/email-protection#1c5b7370787e796e7b4b5c6f6970707f6e7371327f7371"><span class="__cf_email__" data-cfemail="40072f2c2422253227170033352c2c23322f2d6e232f2d">[email protected]</span></a>.
FOR FURTHER INFORMATION CONTACT: Asaf Barouk, Attorney-Adviser, at
(202) 551-4029, Kyle R. Ahlgren, Acting Branch Chief, at (202) 551-6857
or Marc Mehrespand, Branch Chief, at (202) 551-8453 (Division of
Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a temporary order and a
summary of the application. For Applicants' representations, legal
analysis, and conditions, please refer to the application, dated May
17, 2022, which may be obtained via the Commission's website by
searching for the file number at the top of this document, or for an
Applicant using the Company name search field, on the SEC's EDGAR
system. The SEC's EDGAR system may be searched at <a href="https://www.sec.gov/edgar/searchedgar/legacy/companysearch.html">https://www.sec.gov/edgar/searchedgar/legacy/companysearch.html</a>. You may also call the
SEC's Public Reference Room at (202) 551-8090.
Applicants' Representations
1. The Pleading Entity is a limited liability company formed under
Delaware law and registered with the Commission as an investment
adviser under the Investment Advisers Act of 1940 (the ``Advisers
Act''). The Pleading Entity advised and sub-advised Fund \2\ assets of
approximately $297.2 million and $29.0 billion, respectively, as of
March 31, 2022. The Pleading Entity is a wholly owned subsidiary of
Allianz Global Investors U.S. Holdings LLC, which in turn is a wholly
owned subsidiary of Allianz SE, the ultimate parent company of Allianz.
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\2\ The terms ``Fund'' and ``Funds'' as used herein refer to any
registered investment company (``RIC''), employees' securities
company (``ESC'') or investment company that has elected to be
treated as a business development company under the Act (``BDC'')
for which a Covered Person (as defined below) currently provides
Fund Servicing Activities (also defined below), or, subject to the
terms and conditions of the Temporary and Permanent Orders, may in
the future provide Fund Servicing Activities.
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2. ALICONA is a stock life insurance company formed under Minnesota
law offering fixed index annuities, individual life insurance and
registered index-linked annuities. ALICONA serves as depositor for
certain variable insurance separate account Funds and is a wholly owned
subsidiary of Allianz of America, Inc., a holding company that is
ultimately owned by Allianz SE.
3. AIM, a wholly owned subsidiary of ALICONA, is a limited
liability company formed under Minnesota law and registered with the
Commission as an investment adviser under the Advisers Act. AIM advises
Fund assets of approximately $18.6 billion as of March 31, 2022.
4. ALFS, a wholly owned subsidiary of ALICONA, is a limited
liability company formed under Minnesota law and registered as a
broker-dealer under the Securities Exchange Act of 1934 (the ``Exchange
Act''). ALFS is a member of the Financial Industry Regulatory Authority
(``FINRA'') and serves as principal underwriter to certain Funds.
5. ALICONY, a wholly owned subsidiary of ALICONA, is a stock life
insurance company formed under New York law offering registered index-
linked annuities. Collectively, ALICONY, ALICONA, AIM, and ALFS, are
referred to in the application and herein as the ``Allianz Life
Applicants''.
6. PIMCO LLC is a limited liability company formed under Delaware
law and registered with the Commission as an adviser under the Advisers
Act. PIMCO LLC advised and sub-advised Fund assets of approximately
$509.6 billion and $46.5 billion, respectively, as of March 31, 2022.
Allianz SE controls 100% of the voting equity of PIMCO LLC.
7. PIMCO Investments, a wholly owned subsidiary of PIMCO LLC (and
together, the ``PIMCO Applicants''), is a limited liability company
formed under Delaware law and a registered broker-dealer under the
Exchange Act. PIMCO Investments is a member of FINRA and serves as
principal underwriter to certain Funds.
8. Other than the Continuing Fund Servicing Applicants, no existing
company of which the Pleading Entity is an ``affiliated person'' within
the meaning of section 2(a)(3) of the Act (``Affiliated Person'')
currently serves as an investment adviser (as defined in section
2(a)(20) of the Act) or depositor of any RIC, ESC, or BDC, or as
principal underwriter (as defined in section 2(a)(29) of the Act) for
any registered open-end investment company (``Open-End Fund''),
registered unit investment trust (``UIT''), or registered face-amount
certificate company (``FACC'') (such activities performed on behalf of
such persons, collectively ``Fund Servicing Activities''). Applicants
request that any relief granted by the Commission to the Continuing
Fund Servicing Applicants pursuant to the application also apply to any
current or future subsidiary of a Continuing Fund Servicing Applicant
of which the Pleading Entity is or may become an Affiliated Person
(together with the Continuing Fund Servicing Applicants, the ``Covered
Persons'') with respect to any activity contemplated by section 9(a) of
the Act.\3\
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\3\ Covered Persons may, if the Temporary and Permanent Orders
are granted, in the future act in any of the capacities contemplated
by section 9(a) of the Act. Any existing or future entities that may
rely on the Temporary and Permanent Orders in the future will comply
with the terms and conditions of this Application. For the avoidance
of doubt, a Covered Person shall not include the Pleading Entity
itself and any direct or indirect subsidiaries of the Pleading
Entity.
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9. On May 17, 2022, the DOJ filed a criminal information (the
``Information'') in the District Court charging the Pleading Entity
with one count of securities fraud in violation of sections 10(b) and
32 of the Exchange Act and rule 10b-5 thereunder. According to the
Statement of Facts that served as the basis for the Plea Agreement (as
summarized in the application, the ``Statement of Facts''), beginning
in at least 2014 and continuing up to and including in or about March
2020, the Pleading Entity engaged in a scheme to defraud investors in a
series of private investment funds (the ``Affected Funds'' \4\) that
pursued Allianz's ``Structured Alpha'' options trading strategy by
making false and misleading statements to current and prospective
investors that substantially understated how risky the Affected Funds
were and overstated the level of independent risk oversight over the
Funds (the ``Conduct'').
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\4\ The Statement of Facts states that, in addition to the
Affected Funds, AGI US also engaged in a scheme to defraud the sole
investor in a UCITS fund.
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10. According to the Statement of Facts, the Pleading Entity
carried out the scheme through, among others, the three portfolio
managers with primary responsibility for managing the Structured Alpha
Funds, specifically, Gregoire Tournant, Trevor Taylor, and Stephen
Bond-Nelson (the ``Individual Defendants''). According to the Statement
of Facts, the compliance and
[[Page 31277]]
risk management functions at the Pleading Entity failed to maintain
adequate oversight of the team managing the Affected Funds, which
allowed the portfolio managers to continue to manage the Affected Funds
in a manner inconsistent with representations to investors. The control
failures also facilitated the portfolio managers' actions to deceive
investors by hiding, and making affirmative misstatements about, risk
over the course of years. The fraudulent scheme inflated the
performance of the Affected Funds, which in turn increased the profits
flowing to the Pleading Entity and its parent companies, and also
increased the compensation of the Individual Defendants. The Affected
Funds ultimately lost more than $7 billion in value during the market
dislocations caused by COVID-19, with investor victims losing over $3.2
billion in principal.
11. Pursuant to the Plea Agreement, the Pleading Entity entered the
Guilty Plea on May 17, 2022 in the District Court to the charge set out
in the Information. Applicants expect that the District Court will
enter a judgment against the Pleading Entity (the ``Judgment'') that
will require remedies that are materially the same as set forth in the
Plea Agreement. The individuals referenced in the Information as
responsible for the Conduct are no longer employed by the Pleading
Entity or any of its affiliates.
12. The Commission instituted a cease-and-desist order against the
Pleading Entity on May 17, 2022 (the ``SEC Order'') in connection with
the Pleading Entity's role in the Conduct. The SEC Order requires the
Pleading Entity to cease and desist from committing or causing any
violations and any future violations of section 10(b) of the Exchange
Act and rule 10b-5 thereunder, sections 206(1), 206(2) and 206(4) of
the Advisers Act and rules 206(4)-7 and 206(4)-8 thereunder. The SEC
Order also imposed a civil money penalty and requires the Pleading
Entity to pay disgorgement of $315.2 million plus prejudgment interest
of $34 million, which shall be deemed satisfied by forfeiture and
restitution ordered by the settlement of parallel criminal charges
entered into by the Pleading Entity in May 2022. In anticipation of the
institution of those proceedings, the Pleading Entity submitted an
Offer of Settlement consenting to the entry of such order, which the
Commission has accepted.
Applicants' Legal Analysis
1. Section 9(a)(1) of the Act provides, in pertinent part, that a
person may not serve or act as an investment adviser or depositor of
any registered investment company or as principal underwriter for any
Open-End Fund, UIT, or FACC, if such person within ten years has been
convicted of any felony or misdemeanor, including those arising out of
such person's conduct as a broker, dealer or bank. Section 2(a)(10) of
the Act defines the term ``convicted'' to include a plea of guilty.
Section 9(a)(3) of the Act extends the prohibitions of section 9(a)(1)
to a company, any affiliated person of which has been disqualified
under the provisions of section 9(a)(1). Section 2(a)(3) of the Act
defines ``affiliated person'' to include, among others, any person
directly or indirectly controlling, controlled by, or under common
control with, the other person. Each Continuing Fund Servicing
Applicant is an Affiliated Person of the Pleading Entity within the
meaning of section 2(a)(3) of the Act. The Plea Agreement would
therefore result in an immediate and automatic disqualification of the
Pleading Entity and each Continuing Fund Servicing Applicant for ten
years under section 9(a)(3) from acting in any of the capacities listed
in section 9(a), by effect of a conviction described in section
9(a)(1).
2. Section 9(c) of the Act provides that: ``[t]he Commission shall
by order grant [an] application [for relief from the prohibitions of
subsection 9(a)], either unconditionally or on an appropriate temporary
or other conditional basis, if it is established [i] that the
prohibitions of subsection 9(a), as applied to such person, are unduly
or disproportionately severe or [ii] that the conduct of such person
has been such as not to make it against the public interest or the
protection of investors to grant such application.'' Applicants have
filed an application pursuant to section 9(c) seeking a Temporary Order
on behalf of all Applicants and a Permanent Order on behalf of the
Continuing Fund Servicing Applicants only. The Permanent Order would
exempt the Continuing Fund Servicing Applicants and other Covered
Persons from the disqualification provisions of section 9(a) of the
Act. The Covered Persons may, if the Orders are granted, in the future
act in any of the capacities contemplated by section 9(a) of the Act
subject to the applicable terms and conditions of the Orders.
3. Applicants believe that the Time-Limited Exemption is consistent
with the principle in section 9(c) that appropriate conditional, short-
term relief is not against the public interest or the protection of
investors. The Time-Limited Exemption is intended to provide the
Pleading Entity with adequate time to transition its advisory
relationships and other Fund Servicing Activities that it performs on
behalf of Funds (the ``the Pleading Entity Advised Funds'') to other
providers of such services. As a result of the section 9(a)
disqualification and absent the Time-Limited Exemption, the Pleading
Entity would be immediately unable as a matter of law to provide Fund
Servicing Activities to the Pleading Entity Advised Funds. Applicants
state that a disqualification of the Pleading Entity before the process
of transitioning the Pleading Entity Advised Funds to replacement
service providers is complete could leave them without critical
advisory services for some period of time, which would be extremely
disruptive to their investment programs and may result in substantial
harm to such Funds and their investors.
4. Applicants believe that the Continuing Fund Servicing Applicants
meet the standards for exemption specified in section 9(c). Applicants
assert that: (i) The scope of the misconduct was limited and did not
involve any of the Continuing Fund Servicing Applicants acting as an
investment adviser, depositor or principal underwriter for any Fund, or
any Fund with respect to which the Continuing Fund Servicing Applicants
engage in Fund Servicing Activities (``Continuing Service Funds'');
(ii) application of the statutory bar would impose significant
hardships on the Continuing Service Funds and their shareholders; (iii)
the prohibitions of section 9(a), if applied to the Continuing Fund
Servicing Applicants, would be unduly or disproportionately severe; and
(iv) the Conduct did not constitute conduct that would make it against
the public interest or protection of investors to grant the exemption
from section 9(a) to the Continuing Fund Servicing Applicants.
5. The Continuing Fund Servicing Applicants represent that the
Conduct did not involve any of the Continuing Fund Servicing Applicants
acting in the capacity as an investment adviser, depositor or principal
underwriter for any Fund. Applicants represent that the Conduct
similarly did not involve any Continuing Service Fund. Instead,
Applicants state that the Conduct occurred entirely within the Pleading
Entity and did not involve the Continuing Fund Servicing Applicants or
any personnel of the Continuing Fund Servicing Applicants. As discussed
above, the individuals referenced in the Information as responsible for
the Conduct are no
[[Page 31278]]
longer employed by the Pleading Entity or any of its affiliates.
6. Applicants acknowledge that the Pleading Entity had significant
gaps and weaknesses in its controls as they related to the Affected
Funds. Applicants acknowledge that the control functions were not
designed to and did not function to ensure that risk was being
monitored in line with what investors had been told. Applicants further
acknowledge that the Pleading Entity's internal audit department
conducted an audit of the Pleading Entity and, although that audit
identified red flags that, if pursued, might have led to identification
of the fraud, no meaningful follow up was conducted. Applicants
represent that Allianz and its affiliates have undertaken certain
remedial measures, as described in more detail in the application.
These remedial measures include compensating Structured Alpha
investors, terminating employee wrongdoers, agreeing that the Pleading
Entity will exit the business of providing Fund Servicing Activities,
improving client communications, enhancing oversight of portfolio
management teams, empowering the Allianz risk management functions, and
implementing a new framework for data quality and processing.
Applicants further represent that each of the Continuing Fund Servicing
Applicants will review its control and risk management framework as it
relates to Fund Servicing Activities, in light of applicable local
legal requirements and the risks related to such Continuing Fund
Servicing Applicant's business, and consider what steps may be
appropriate to enhance that framework to ensure that it is reasonably
designed to prevent behavior similar to the Conduct from occurring at
such Continuing Fund Servicing Applicant. The results of such review
will be included in the report required by Condition 5 of the
application (detailed below).
7. Applicants assert that, in view of the fact that the Conduct was
limited to the Pleading Entity and its personnel, it would be unduly
and disproportionately severe to impose a section 9(a) disqualification
on the Continuing Fund Servicing Applicants. Applicants assert that the
conduct of the Continuing Fund Servicing Applicants has not been such
as to make it against the public interest or the protection of
investors to grant the exemption from section 9(a). Applicants further
assert that neither the protection of investors nor the public interest
would be served by permitting the section 9(a) disqualifications to
apply to the Continuing Fund Servicing Applicants because those
disqualifications would deprive the Continuing Service Funds of the
advisory or sub-advisory and underwriting services that shareholders
expected the Continuing Service Funds to receive when they decided to
invest. Applicants also assert that the prohibitions of section 9(a)
could operate to the financial detriment of the Continuing Service
Funds and their shareholders, including by causing the Continuing
Service Funds to spend time and resources to engage substitute
advisers, subadvisers, and principal underwriters, which would be an
unduly and disproportionately severe consequence given that the Conduct
did not involve any of the Continuing Fund Servicing Applicants or
their personnel.
8. Applicants assert that if the Continuing Fund Servicing
Applicants were barred under section 9(a) from providing investment
advisory services to the Continuing Service Funds and were unable to
obtain the requested exemption, the effect on their businesses and
employees would be severe. Applicants state that the Continuing Fund
Servicing Applicants have committed substantial capital and other
resources to establishing expertise in advising and sub-advising Funds
with a view to continuing and expanding this business, which Applicants
consider strategically important. Similarly, Applicants represent that
if ALFS and PIMCO Investments were barred under section 9(a) from
continuing to provide underwriting services to the Funds and were
unable to obtain the requested exemption, the effect on its current
business and employees would be significant. Applicants state that ALFS
and PIMCO Investments have committed capital and other resources to
establish expertise in underwriting the securities of the Continuing
Service Funds and to establish distribution arrangements for Fund
shares. Applicants further state that prohibiting the Continuing Fund
Servicing Applicants from engaging in Fund Servicing Activities would
not only adversely affect their business, but would also adversely
affect their employees who are involved in these activities.
9. Applicants represent that: (1) None of the current or former
directors, officers or employees of Continuing Fund Servicing
Applicants engaged in the Conduct; (2) no current or former employee of
the Pleading Entity or any Covered Person who previously has been or
who subsequently may be identified by the Pleading Entity or any U.S.
or non-U.S. regulatory or enforcement agencies as having been
responsible for the Conduct will be an officer, director, or employee
of any Covered Person; (3) the identified employees have had no, and
will not have any, future involvement in the Covered Persons'
activities in any capacity described in section 9(a) of the Act; and
(4) because the personnel of the Continuing Fund Servicing Applicants
did not engage in the Conduct, shareholders of the Funds served by the
Continuing Fund Servicing Applicants were not affected any differently
than if those Funds had received services from any other non-affiliated
investment adviser.
10. Applicants have also agreed that each of the Applicants and
Covered Persons will adopt and implement policies and procedures
reasonably designed to ensure that it will comply with the terms and
conditions of the Orders granted under section 9(c).
11. In addition, Applicants have agreed that each of the Applicants
and Covered Persons will comply in all material respects with the
material terms and conditions of the Plea Agreement and the SEC Order,
and any other orders issued by, or settlements with, regulatory or
enforcement agencies addressing the Conduct.
12. As a result of the foregoing, the Continuing Fund Servicing
Applicants submit that absent relief, the prohibitions of section 9(a)
as applied to the Continuing Fund Servicing Applicants would be unduly
or disproportionately severe, and that the Conduct did not constitute
conduct that would make it against the public interest or protection of
investors to grant the exemption to the Continuing Fund Servicing
Applicants.
13. To provide further assurance that the exemptive relief being
requested in the application would be consistent with the public
interest and the protection of the investors, the Applicants agree that
they will, within two weeks from the date of the Time-Limited
Exemption, as applicable, with respect to each of the Funds for which a
Continuing Fund Servicing Applicant is the primary investment adviser,
distribute to the boards of directors or trustees of the Funds (each, a
``Fund Board'') written materials describing the circumstances that led
to the Plea Agreement, as well as any effects on the Funds and the
application. The written materials will include an offer to discuss the
materials at an in-person meeting with each Fund Board for which Fund
Servicing Providers provide Fund Servicing Activities, including the
directors who are not ``interested persons'' of the Funds as
[[Page 31279]]
defined in section 2(a)(19) of the Act and their ``independent legal
counsel'' as defined in rule 0-1(a)(6) under the Act. With respect to
each of the Funds for which a Fund Servicing Provider is not the
primary investment adviser, the relevant Fund Servicing Provider will
provide such materials to the Fund's primary investment adviser and
offer to discuss the materials with such primary investment adviser.
The Applicants undertake to provide the Fund Boards and the primary
investment advisers, as relevant, with all information concerning the
Plea Agreement and the application as necessary for those Funds to
fulfill their disclosure and other obligations under the U.S. federal
securities laws and will provide them a copy of the Judgment as entered
by the District Court.
Applicants' Conditions
Applicants agree that any order granted by the Commission pursuant
to the application will be subject to the following conditions:
1. Any temporary exemption granted pursuant to the application will
be without prejudice to, and will not limit the Commission's rights in
any manner with respect to, any Commission investigation of, or
administrative proceedings involving or against, Covered Persons,
including, without limitation, the consideration by the Commission of a
permanent exemption from section 9(a) of the Act requested pursuant to
the application or the revocation or removal of any temporary
exemptions granted under the Act in connection with the application.
2. None of Allianz SE, the Applicants, the Covered Persons or any
affiliate of any of the foregoing, will employ the former employees of
the Pleading Entity or any other person who subsequently may be
identified by the Pleading Entity or any U.S. or non-U.S. regulatory or
enforcement agencies as having been responsible for the Conduct in any
capacity without first making a further application to the Commission
pursuant to section 9(c).
3. Each of the Applicants and the Covered Persons will adopt and
implement policies and procedures reasonably designed to ensure that it
will comply with the terms and conditions of the Orders applicable to
it within 60 days of the date of the Permanent Order, or with respect
to condition four immediately below, such later date or dates as may be
contemplated by the Plea Agreement, the SEC Order, or any other orders
issued by regulatory or enforcement agencies addressing the Conduct, as
and to the extent that the terms and conditions of such orders are
applicable to it.
4. Each of the Applicants and the Covered Persons will comply in
all material respects with the material terms and conditions of the
Plea Agreement, with the material terms of the SEC Order, and any other
orders issued by, or settlements with, regulatory or enforcement
agencies addressing the Conduct, in each case as and to the extent that
such terms and conditions are applicable to it. In addition, within 30
days of each anniversary of the Permanent Order (until and including
the third such anniversary), Allianz SE will submit a certification
signed by its chief executive officer and its chief compliance officer,
confirming that (i) the Pleading Entity has complied with the terms and
conditions of the Plea Agreement in all material respects; and (ii)
Allianz SE, the Pleading Entity and the Covered Persons have complied
with the terms and conditions of the Orders applicable to them in all
material respects. Each such certification will be submitted to the
Chief Counsel of the Commission's Division of Investment Management
with a copy to the Chief Counsel of the Commission's Division of
Enforcement.
5. Each Applicant will provide written notification to the Chief
Counsel of the Commission's Division of Investment Management with a
copy to the Chief Counsel of the Commission's Division of Enforcement
of a material violation by such Applicant of the terms and conditions
of the Orders applicable to it within 30 days of discovery of the
material violation. In addition, within 30 days of the first
anniversary of the Permanent Order, the Continuing Fund Servicing
Applicants will submit reports, signed by the chief executive officer
of ALICONA (in the case of the Allianz Life Applicants) and the chief
executive officer of PIMCO LLC (in the case of the PIMCO Applicants),
to the Chief Counsel of the Commission's Division of Investment
Management, summarizing the results of the reviews described in Section
V.F of the application, including a description of each specific step
taken by each Continuing Fund Servicing Applicant to enhance its
control and risk management framework since the date of the Permanent
Order.
6. The Pleading Entity commits to provide the staff of the
Commission's Division of Investment Management, no later than one week
from the date of the Time-Limited Exemption, a written plan for the
transitioning of the Pleading Entity Advised Funds to new sub-advisers,
and with respect to the Taiwan Fund, to a new adviser, which plan will
include specific action items with associated timetables, and will
contemplate the completion of the transition within a ten-week period
with respect to the open-end Pleading Entity Advised Funds and within a
four-month period with respect to the closed-end Pleading Entity
Advised Funds. The Pleading Entity further commits that, during the
pendency of the Time-Limited Exemption, the Pleading Entity will use
its reasonable best efforts to assist each primary adviser, board of
directors or trustees of each Pleading Entity Advised Fund (each such
board, a ``Pleading Entity Advised Fund Board'') and/or fund
administrator, as applicable, in (A) identifying a potential
replacement sub-adviser or adviser, as applicable, (B) soliciting
information from those firms, (C) conducting due diligence on such
firms, (D) gathering information responsive to requirements of Section
15(c) of the Act, (E) negotiating an advisory contract, (F) drafting
prospectus disclosure about the transition, (G) otherwise updating the
Fund's registration statement, (H) obtaining Pleading Entity Advised
Fund Board approval consistent with the Act, and (I) with respect to
the closed-end Funds, seeking shareholder approval of the new sub-
adviser or adviser, as applicable. The Pleading Entity will report to
the staff of the Commission's Division of Investment Management on the
progress of the transition and the actions being taken by the Pleading
Entity to further such transition no less frequently than every two
weeks. The Pleading Entity or one or more of its affiliates will bear
all expenses associated with the transitions, and no Pleading Entity
Advised Funds will directly or indirectly bear any expenses associated
with such transitions, including any expenses associated with obtaining
shareholder approval, if applicable.
7. The Time-Limited Exemption will remain in place: (i) With
respect to the open-end Pleading Entity Advised Funds for which the
Pleading Entity serves as a sub-adviser, for a ten-week period from the
date of the Time-Limited Exemption; and (ii) with respect to the
closed-end Pleading Entity Advised Funds, for a four-month period from
the date of the Time-Limited Exemption.
Temporary Order
The Commission has considered the matter and finds that Applicants
have made the necessary showing to justify granting a temporary
exemption.
Accordingly,
[[Page 31280]]
It is hereby ordered, pursuant to section 9(c) of the Act, that:
(1) The Pleading Entity is granted a temporary exemption, limited in
all respects to the Time-Limited Exemption, including as to its time-
limited nature, from the provisions of section 9(a); and (2) the
Continuing Fund Servicing Applicants and any other Covered Persons are
granted a temporary exemption from the provisions of section 9(a), in
each case effective as the date of the Guilty Plea, and in each case
solely with respect to the Guilty Plea entered into pursuant to the
Plea Agreement, subject to the representations and conditions in the
application, until the Commission takes final action on their
application (or, in the case of the Time-Limited Exemption, until it
expires by its terms, if sooner).
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10965 Filed 5-20-22; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on May 23, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.