Ex-Pimco CEO to settle market timing allegations

Stephen Treadway, the former chief executive of Pimco Advisors Distributors, agreed to pay $572,000 to settle Securities and Exchange Commission allegations that he engaged in mutual fund market timing.

Treadway, 59, also agreed to a one-year ban on serving as an officer or director of an investment company, the SEC said Thursday. A federal jury found Treadway guilty of fraud, breaching fiduciary duty and other violations of securities laws in June.

The SEC accused Treadway of allowing now-defunct hedge fund Canary Capital Partners to make excessive in-and-out trades in 2002 and 2003. In return, Canary deposited $25 million into Pimco funds and paid management fees, according to the SEC.

“The essence of this case is that all investors in a mutual fund -- large or small, wealthy or not -- are entitled to a level playing field,” Randall Lee, director of the SEC’s Los Angeles office, said in a statement.

Treadway served as chairman of the board of trustees for the family of Pimco stock funds. Pimco’s bond fund group -- Newport Beach-based Pacific Investment Management Co. -- wasn’t part of the case.

Treadway’s lawyer, Alan Levine, didn’t immediately return a phone call seeking comment.

Under rules governing Pimco, which is owned by European insurer Allianz, investors were supposed to be limited to trading in, out and back into funds six times a year. Market timing can raise a fund’s transaction costs, reducing gains for long-term holders.

Regulators have garnered $5 billion in penalties from mutual fund and brokerage companies accused of improper trading.