Pimco disclosed that it received a Wells notice from the SEC concerning its Total Return Active ETF. A Wells notice is sent to a protential defendant by the SEC to advise the potential defendant of the Staff’s intention to file civil charges, and to give the potential defendant the opportunity to argue why the action should not be commenced.
The notice is not a lawsuit, and is not a formal allegation of wrongdoing. While the mere existence of a Wells notice does not indicate that there has been wrongdoing, the Wells notice does indicate that the Staff believes it has grounds to institute an enforcement proceeding.
The SEC is looking at a four-month time period between the fund’s launch on Feb. 29, 2012 and June 30, 2012, examining how Pimco valued smaller-size positions in nonagency mortgage-backed securities purchased by the ETF during that time, according to the release. They are also looking at the fund’s performance disclosures for that period, and at Pimco’s compliance policies and procedures.