Aon, without admitting or denying the findings, consented to a settled order acknowledging a violation of Section 206(2) of the Advisers Act. The order censures Aon, imposes a civil penalty of $1 million, and mandates disgorgement and prejudgment interest of $542,187.
The Securities and Exchange Commission (SEC) has announced that it reached settlements in charges against Aon Investments USA Inc., a registered investment adviser based in Chicago, and its former partner, Claire P. Shaughnessy. The charges relate to allegations of misleading their client, the Pennsylvania Public School Employees’ Retirement System (PSERS), regarding a discrepancy in Aon's calculations of PSERS's investment returns for a specific period.
According to the SEC's findings, Aon was responsible for calculating PSERS's investment returns for "risk share," a provision in Pennsylvania law requiring increased contributions from public school employees if the retirement fund fails to meet specified investment return rates. PSERS faced a risk share trigger if its investment return rate for the nine-year period ending June 30, 2020, fell below 6.36 percent.
In June 2020, Aon provided quarterly returns to PSERS for estimating its investment return rate. The SEC alleges that some of the quarterly returns did not align with historical returns provided by Aon for the same periods. PSERS questioned Aon's calculations, prompting inquiries about the discrepancy.
The SEC asserts that Aon and Shaughnessy failed to adequately investigate the discrepancy and instead provided two reasons that Aon had previously ruled out. Shaughnessy allegedly misrepresented to PSERS that the discrepancy was not due to errors when, in reality, she did not know the reason.
Aon and Shaughnessy reported to PSERS in December 2020 that the risk share return rate for the period was 6.38 percent, avoiding the risk share trigger. Subsequently, the corrected return rate, after identifying errors in the data, was 6.34 percent, triggering risk share and requiring additional employee contributions.
Aon, without admitting or denying the findings, consented to a settled order acknowledging a violation of Section 206(2) of the Advisers Act. The order censures Aon, imposes a civil penalty of $1 million, and mandates disgorgement and prejudgment interest of $542,187. Similarly, Shaughnessy, without admitting or denying the findings, consented to a settled order acknowledging a violation of Section 206(2) of the Advisers Act. The order censures Shaughnessy and imposes a civil penalty of $30,000.
LeeAnn G. Gaunt, Chief of the Public Finance Abuse Unit, emphasized the importance of investment advisers being transparent and honest with their clients, particularly pension funds and municipal entities that rely on accurate information.
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