[Federal Register Volume 87, Number 99 (Monday, May 23, 2022)]
[Notices]
[Pages 31275-31280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[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 https://www.sec.gov/edgar/searchedgar/legacy/companysearch.html. 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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