UNITED STATES OF AMERICA

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 99253 / December 28, 2023

ADMINISTRATIVE PROCEEDING

File No. 3-20855

:

In the Matter of

:

:

Allianz Global Investors U.S. LLC, :

:

Respondent.

:

:

NOTICE OF AMENDED PROPOSED

PLAN OF DISTRIBUTION AND

OPPORTUNITY FOR COMMENT

Notice is hereby given, pursuant to Rule 1103 of the United States Securities and

Exchange Commission’s (the “Commission”) Rules on Fair Fund and Disgorgement Plans (the

“Commission’s Rules”), 17 C.F.R. § 201.1103, that in response to certain comments received on

the Proposed Plan of Distribution (“Proposed Plan”) published on May 22, 2023,1 the Division of

Enforcement (the “Division”) has submitted to the Commission an amended proposed plan of

distribution (the “Amended Proposed Plan”) for the distribution of monies paid in the abovecaptioned matter. The Proposed Plan has been modified to expand the list of eligible Securities2

and to revise the Plan of Allocation to adopt a “rising tide” methodology rather than a “pro rata”

methodology.3

On May 17, 2022, the Commission issued an Order Instituting Administrative and Ceaseand-Desist Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of

1934 and Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, Making Findings,

and Imposing Remedial Sanctions and a Cease-and-Desist Order (the “Order”)4 against Allianz

Global Investors U.S. LLC (“AGI US” or the “Respondent”). In the Order, the Commission

found that AGI US employed a complex options trading strategy known as Structured Alpha that

AGI US marketed and sold to investors in various funds (“Structured Alpha Funds”). The

Structured Alpha Funds were intended to generate profits by using a portfolio of debt or equity

1

Exchange Act Rel. No. 97540 (May 22, 2023).

All capitalized terms used herein but not defined shall have the same meanings ascribed to them in the Amended

Proposed Plan.

3

In response to other comments received, the Amended Proposed Plan submitted by the Division has not been

modified. In response to one comment received, current distribution procedures are sufficient to address the

concerns raised regarding disposition of the Residual and the confidentiality of information submitted by claimants.

In response to another comment received, provisions as initially proposed relating to the sale or transfer of an

investor claim and the payment of third-party filers are fair and reasonable.

4

Exchange Act Rel. No. 94927 (May 17, 2022).

2

securities as collateral to purchase and sell options principally on the S&P 500 Index. The

Structured Alpha Funds performed well until the COVID-related market volatility in March 2020

when they suffered catastrophic losses, including losses in excess of 90% in certain funds.

Beginning on or before January 2016, and continuing through March 2020, AGI US, through the

Structured Alpha portfolio management team, misled investors as to the significant downside

risk of the Structured Alpha Funds, which included misrepresentations and omissions made in

connection with the purchase and sale of these securities. First, AGI US’s marketing materials

misrepresented to investors the levels at which hedging positions were put in place. Second, the

portfolio management team did not consistently implement a bespoke risk mitigation program

agreed to with the largest client in the Structured Alpha Funds. Third, the portfolio management

team manipulated reports and other information provided to or created for certain investors on an

ad hoc basis to conceal the magnitude of the strategy’s downside risk. In addition, the portfolio

management team misrepresented to investors that Structured Alpha had a capacity limit of $9

billion for certain funds when, in reality, it exceeded that amount by over $3 billion. After

COVID-related market volatility in March 2020, the portfolio management team engaged in

numerous, ultimately unsuccessful, efforts to conceal their misconduct from the Commission

staff. The Commission ordered the Respondent to pay $349,200,000 in disgorgement and

prejudgment interest, which was deemed satisfied by forfeiture and restitution ordered in

settlement of a parallel criminal proceeding. The Commission further ordered the Respondent to

pay a $675,000,000.00 civil money penalty and created a Fair Fund, pursuant to Section 308(a)

of the Sarbanes-Oxley Act of 2002, so the penalty paid can be distributed to harmed investors

(the “Fair Fund”). In accordance with the Order, the Respondent paid $131,314,739.08 directly

to certain investors and the remaining $543,685,260.92 to the Commission.

The Fair Fund includes the $543,685,260.92 paid by the Respondent. The assets of the

Fair Fund are subject to the continuing jurisdiction and control of the Commission. The Fair

Fund has been deposited in a Commission-designated account at the U.S. Department of the

Treasury, and any interest accrued will be added to the Fair Fund.

OPPORTUNITY FOR COMMENT

Pursuant to this Notice, all interested persons are advised that they may obtain a copy of

the Plan from the Commission’s public website at http://www.sec.gov/litigation/fairfundlist.htm.

Interested persons may also obtain a written copy of the Amended Proposed Plan by submitting a

written request to Amy A. Sumner, United States Securities and Exchange Commission, Byron

Rogers Federal Office Building, 1961 Stout Street, Suite 1700, Denver, CO 80294-1961. All

persons who desire to comment on the Amended Proposed Plan may submit their comments, in

writing, no later than thirty (30) days from the date of this Notice:

1.

to the Office of the Secretary, United States Securities and Exchange

Commission, 100 F Street, NE, Washington, DC 20549-1090;

2.

by using the Commission’s Internet comment form

(http://www.sec.gov/litigation/admin.shtml); or

3.

by sending an e-mail to rule-comments@sec.gov.

2

Comments submitted by email or via the Commission’s website should include “Administrative

Proceeding File No. 3-20855” in the subject line. Comments received will be publicly available.

Persons should submit only information they wish to make publicly available.

THE AMENDED PROPOSED PLAN

The Amended Proposed Plan provides for the distribution of the Net Available Fair Fund,

comprised of the $543,685,260.92 in civil money penalties paid by the Respondent, plus interest

and income earned thereon, less taxes, fees, and expenses, to investors who held eligible

Securities during the Relevant Period and suffered a Recognized Loss as calculated by the

methodology used in the Plan of Allocation attached as Exhibit A to the Plan.

The Amended Proposed Plan has been modified to expand the list of Securities eligible to

participate in the distribution of the Fair Fund, and allows for it to be expanded further based on

information received during the claims process.5 The Plan of Allocation has also been modified

to adopt a “rising tide” methodology that accounts for Prior Recoveries. The Amended Proposed

Plan further includes some modifications to clarify the documentation that may be required for

the Fund Administrator to calculate Recognized Loss and provide internal consistency.

In response to other comments received, the Amended Proposed Plan has not been

modified. In response to one comment received, current distribution procedures are sufficient to

address the concerns raised regarding disposition of the Residual and the confidentiality of

information submitted by claimants. In response to another comment received, provisions as

initially proposed relating to the sale or transfer of an investor claim and the payment of thirdparty filers are fair and reasonable.

By the Commission.

Vanessa A. Countryman

Secretary

5

The Amended Proposed Plan allows claims to be submitted for investment product(s) not included on the list of

known Securities (Table A of the Plan of Allocation) provided that the investor can demonstrate that AGI US

employed the Structured Alpha trading strategy on those investment products during the Relevant Period. The Fund

Administrator, in consultation with the Commission staff, will determine whether such investment products are

Securities for purposes of the Amended Proposed Plan.

3