PIMCO is responding to allegations that it improperly allowed market timers in its funds by adopting one of the SEC's fixes. The firm will be adding redemption fees to its funds.
All investors of PIMCO’s
public funds purchased after June 15, 2004 will be subject to a two percent redemption fee, the company revealed in an SEC filing
. The rule does not apply to PIMCO’s Money Market Fund.
Citing deterrence of "abusive trading" and recovery of short-term transaction costs, the firm is imposing a schedule of holding periods for its public funds ranging from seven days to 60 days. The fee applies to the net asset value of the shares exchanged.
Although some of the firm's funds already impose redemption fees, the rules in the Friday filing supersede any existing fees and holding periods.
The firm will not collect the redemption fee on broker-dealer omnibus accounts, certain retirement plan accounts, or other aggregated investor accounts. Because of these limitations, the redemption fees "may not successfully eliminate excessive short-term trading in shares of the Funds." The firm’s spokesman was not able to immediately provide information on the size of these accounts.
The SEC has recommended a new rule that would require all non-money market funds to impose a two percent redemption charge on shares held for fewer than five days. That rule is currently in a public comment period.
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