# UNITED STATES OF AMERICA

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URL: https://www.frixlaw.com/law-library/documents/agency%3Asec%3A5cc70e44233d5b07

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

ADMINISTRATIVE PROCEEDING
File No. 3-21836

In the Matter of
Claire P. Shaughnessy,
Respondent.

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PROPOSED PLAN OF
DISTRIBUTION

ADMINISTRATIVE PROCEEDING
File No. 3-21837

In the Matter of
Aon Investments USA Inc., fka Aon
Hewitt Investment Consulting, Inc.,
Respondent.
I.

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OVERVIEW

1.
The Division of Enforcement submits this Proposed Plan of Distribution (the
“Plan”) to the United States Securities and Exchange Commission (the “Commission”) pursuant
to Rule 1101 of the Commission’s Rules on Fair Fund and Disgorgement Plans (the
“Commission’s Rules”), 17 C.F.R. § 201.1101. This Plan provides for the distribution of a Fair
Fund (the “Fair Fund”) comprised of disgorgement, prejudgment interest, and civil money
penalties paid by Claire P. Shaughnessy (“Shaughnessy”)1 and Aon Investments USA Inc., fka
Aon Hewitt Investment Consulting, Inc. (“Aon”)2 (collectively, the “Respondents”) in the abovecaptioned matters.

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Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Sections 203(f) and 203(k) of the
Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist
Order, Advisers Act Rel. No. 6535 (Jan. 25, 2024), (Admin. Proc. File No. 3-21836) (the “Shaughnessy Order”).
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Corrected Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Sections 203(e) and
203(k) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Ceaseand-Desist Order, Advisers Act Rel. No. 6536 (Jan. 25, 2024), (Admin. Proc. File No. 3-21837) (the “Aon Order,”
and with the Shaughnessy Order, collectively (the Orders”)).

2.
As described more specifically below, the Plan seeks to compensate an investor
who was harmed by the Respondents’ misconduct, as described in the Orders, in connection with
fees paid for certain investment advisory and investment consulting services. As calculated
using the methodology detailed in the Plan of Allocation (attached as Exhibit A), a single harmed
investor will be compensated for investment advisory fees that it paid between July 1, 2020,
through March 31, 2021, inclusive (the “Relevant Period”) due to the Respondents’ misconduct.
Based on information obtained by the Commission staff during its investigation and the review
and analysis of applicable records, the Commission staff has reasonably concluded that it has all
records necessary to calculate the investor’s harm. As a result, the Fair Fund is not being
distributed according to a claims-made process, so procedures for making and approving claims
in accordance with Rule 1101(b)(4) of the Commission’s Rules, 17 C.F.R. § 201.1101(b)(4), are
not applicable.
3.
As calculated using the methodology detailed in the Plan of Allocation (attached
as Exhibit A), the investor will be compensated for investment advisory fees paid to Aon during
the Relevant Period.
4.
In the view of the Commission staff, this methodology constitutes a fair and
reasonable allocation of the Fair Fund.
5.
The Commission has custody of the Fair Fund and shall retain control of the
assets of the Fair Fund. The Plan is subject to approval by the Commission, and the Commission
retains jurisdiction over its implementation.
II.

BACKGROUND

6.
On January 25, 2024, the Commission issued the Orders against the Respondents.
In the Orders, the Commission found that Aon’s and Shaughnessy’s conduct were inconsistent
with their duties to their client, the Pennsylvania Public School Employees’ Retirement System
(“PSERS”), under the Investment Advisers Act of 1940 (“Advisers Act”). According to the
Orders, from 2013 through 2023, Aon acted as investment adviser for PSERS and provided
certain investment advisory and investment consulting services to PSERS pursuant to a written
agreement. From approximately July 2012 to December 2022, Shaughnessy was a partner and
investment adviser representative associated with Aon and was the lead partner on Aon’s
engagement with PSERS from 2013 until December 2022. The Commission found that, as set
out in its agreement with PSERS, Aon was responsible for, among other things, calculating
PSERS’s investment returns, which were then used for calculating what is known as “risk share.”
Risk share is a provision in the Pennsylvania Pension Code that requires certain public-school
employees to contribute more to the retirement fund if certain annualized investment return
targets, or “hurdles,” are not met.
7.
According to the Orders, as lead partner, Shaughnessy provided investment
advisory services to PSERS and was in charge of Aon’s calculation of PSERS’s investment
performance and the risk share return rate calculation. The Commission found that Aon and
Shaughnessy engaged in conduct that was inconsistent with their duties to PSERS by failing to
adequately investigate a discrepancy between the underlying performance data used by them to

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calculate the risk share return rate and the historically reported returns and by making material
misstatements and omissions in communications to PSERS concerning the causes of the
discrepancy and the extent to which Respondents understood those causes. As a result of the
conduct described herein, the Commission found that Aon and Shaughnessy both willfully
violated Section 206(2) of the Investment Advisers Act of 1940.
8.
In their respective Orders, the Commission ordered Aon to pay disgorgement of
$495,098.50, prejudgment interest of $47,089.29 and a civil penalty of $1,000,000.00, and
Shaughnessy to pay a civil penalty of $30,000, to the Commission. In each of the Orders, the
Commission also created a Fair Fund pursuant to Section 308(a) of the Sarbanes-Oxley Act of
2002, so the funds collected can be distributed to harmed investors and ordered that the funds
may be combined with any other distribution fund or fair fund arising out of the same facts that
are the subject of the Order.
9.
In accordance with the Orders, the $1,572,187.79 collected from Shaughnessy and
Aon has been combined (collectively, the “Fair Fund”) and deposited in a Commissiondesignated account at the U.S. Department of the Treasury (the “Treasury”). Any accrued
interest will be added to the Fair Fund.
III.

DEFINITIONS
As used in this Plan, the following definitions will apply:

10.
“Administrative Costs” shall mean any administrative costs and expenses,
including without limitation tax obligations, the fees and expenses of the Tax Administrator, and
investment and banking costs.
11.
“Distribution Payment” means a payment from the Fair Fund to the Eligible
Claimant in accordance with the terms of this Plan.
12.
“Eligible Claimant” means the investor, or their lawful successors, who was
harmed as a result of Fees Paid due to the Respondents’ misconduct described in the Orders.
13.
“Fair Fund” means the fund created by the Commission pursuant to Section
308(a) of the Sarbanes-Oxley Act of 2002, for the benefit of the investor harmed by
Respondents’ violations described in the Orders.
14.
“Fees Paid” is the total amount of investment advisory fees paid to the
Respondents during the Relevant Period, as calculated by the Fund Administrator based on her
review and analysis of applicable records obtained by the Commission staff during its
investigation.
15.
“Net Available Fair Fund” means the Fair Fund, plus any interest or earnings,
less Administrative Costs.

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16.
inclusive.
IV.

“Relevant Period” is the period from July 1, 2020, through March 31, 2021,

TAX COMPLIANCE

17.
On October 11, 2024, the Commission appointed Miller Kaplan Arase LLP as the
tax administrator (the “Tax Administrator”) for the Fair Fund to handle the tax obligations of the
Fair Fund.3 The Tax Administrator will be compensated for reasonable fees and expenses from
the Fair Fund in accordance with its 2022-2024 Engagement Letter Agreement with the
Commission.4
18.
The Fair Fund constitutes a Qualified Settlement Fund (“QSF”) under Section
468B(g) of the Internal Revenue Code of 1986, as amended, 26 U.S.C. § 468B(g), and related
regulations, 26 C.F.R. §§ 1.468B-1 through 1.468B-5. The Tax Administrator is the
administrator of such QSF for purposes of Treas. Reg. § 1.468B-2(k)(3)(I) and shall satisfy the
tax-related administrative requirements imposed by Treas. Reg. § 1.468B-2, including, but not
limited to:
(a)

Obtaining a taxpayer identification number;

(b)

Requesting funds necessary for the timely payment of all applicable taxes,
the payment of taxes for which the Tax Administrator has received funds,
and the filing of applicable returns; and

(c)

Fulfilling any information reporting or withholding requirements imposed
on distributions from the Fair Fund, including but not limited to Foreign
Account Tax Compliance Act (FATCA).

19.
All tax obligations will be paid from the Fair Fund, subject to the review and
approval of Commission staff.
V.

FUND ADMINISTRATOR

20.
Keshia Ellis is proposed to be the fund administrator for the Fair Fund (“Fund
Administrator”). As a Commission employee, the Fund Administrator shall receive no
compensation, other than her regular salary as a Commission employee, for her services in
administering the Fair Fund. In accordance with Rule 1105(c) of the Commission’s Rules,5 no
bond is required since the Fund Administrator is a Commission employee.
21.
The Fund Administrator will be responsible for administering the Fair Fund in
accordance with the Plan.

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See Order Appointing Tax Administrator, Exchange Act Rel. No. 101318 (Oct. 11, 2024).
See Omnibus Order Directing the Engagement of Two Tax Administrators for Appointment on a Case-By-Case
Basis in Administrative Proceedings that Establish Distribution Funds, Exchange Act Rel. No. 94845 (May 4, 2022).
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17 C.F.R. § 201.1105(c).
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22.
To carry out the purposes of this Plan, the Fund Administrator is authorized to
make and implement immaterial changes to the Plan upon agreement of the Commission staff. If
a change is deemed to be material by the Commission staff, Commission approval is required
prior to implementation by amending the Plan.
23.
The Fund Administrator may extend any procedural deadline contained in the
Plan for good cause shown, if agreed upon by the Commission staff.
VI.

PLAN PROCEDURES
Plan Notice and Eligible Claimant’s Obligation with Respect to the Plan Notice

24.
Within 30 days of Commission approval of the Plan, the Fund Administrator will
send the Plan Notice to the Eligible Claimant’s last known email address (if known) and/or
mailing address informing them of the Commission’s approval of the Plan. The Plan Notice will
include a link to the approved Plan posted on the Commission’s website and a copy of the Plan;
the calculated Fees Paid for the Eligible Claimant; and specify all the information and
documentation required to be returned to the Fund Administrator in order to receive their
Distribution Payment.
Dispute Process
25.
Disputes will be limited to calculation of the Fees Paid to the Respondents.
Within 30 days of the mailing of the Plan Notice, the Fund Administrator must receive a written
communication detailing any dispute along with any supporting documentation. The Fund
Administrator will investigate the dispute, and such investigation will include a review of the
written dispute as well as any supporting documentation. The Fund Administrator will respond
within 15 days of receipt of the dispute.
Distribution Methodology
26.
The Fund Administrator will allocate the Net Available Fair Fund as calculated in
accordance with the Plan of Allocation attached as Exhibit A.
Establishment of a Reserve
27.
Before determining the Net Available Fair Fund, the Fund Administrator, in
conjunction with the Tax Administrator, will establish a reserve to pay Administrative Costs and
to accommodate any unexpected expenditures (the “Reserve”).
28.
Any remaining amounts in the Reserve after all Administrative Costs are paid,
will become part of the Residual described below.
Disbursement of the Fair Fund
29.

The Fund Administrator will compile the payee information and prepare a payment

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file to make the disbursement. The completed payment file, and support, will be processed in
accordance with the appropriate procedures. Pursuant to Rule 1101(b)(6) of the Commission’s
Rules, 17 C.F.R. § 201.1101(b)(6), the Fund Administrator will obtain an order from the
Commission to disburse the Fair Fund. The Fund Administrator is responsible for accounting for
all payments.
30.
All payments, either on their face or in the accompanying mailing, will clearly
indicate that the money is being distributed from the Fair Fund established by the Commission to
compensate the investor for harm as a result of securities law violations.
Receipt of Additional Funds
31.
Should any additional funds be received pursuant to Commission or Court order,
agreement, or otherwise, prior to the Commission’s termination of the Fair Fund, such funds will
be added to the Fair Fund and distributed, if feasible, in accordance with the Plan, pursuant to the
Commission’s Rules.
Disposition of Undistributed Funds
32.
A residual account within the Fair Fund will be established for any amounts
remaining after the final disbursement to the Eligible Investor from the Fair Fund (the
“Residual”). The Residual may include, but is not limited to, undistributed funds, distribution
checks that have not been cashed, Fair Fund tax refunds for overpayment or for waiver of IRS
penalties.
33.
If any funds remain in the Residual account after completion of all distributions
and the payment of all Administrative Costs, those funds will be transferred to the Treasury,
subject to Section 21F(g)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”), after
the final accounting is approved by the Commission. Returning such money to the Respondents
would be inconsistent with the equitable principle that no Person should profit from his
wrongdoing. Therefore, in these circumstances distributing disgorged funds to the U.S. Treasury
is the most equitable alternative.
Administrative Costs
34.
All Administrative Costs will be paid from the Fair Fund in accordance with the
Commission’s Rules.
Accountings
35.
When all funds have been disbursed, except for the Residual described above, the
Fund Administrator will submit a final accounting pursuant to Rule 1105(f) of the Commission’s
Rules, 17 C.F.R. § 201.1105(f), for the Commission’s approval prior to termination of the Fair
Fund and discharge of the Fund Administrator. Since the funds are being held in a Commission
designated account at the U.S. Treasury and the Fund Administrator is a Commission employee,
no interim accountings will be made.

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Termination of the Fair Fund
36.
The Fair Fund will be eligible for termination and the Fund Administrator will be
eligible for discharge after all the following have occurred (a) a final accounting, in a standard
accounting format provided by the Commission staff, has been submitted by the Fund
Administrator and approved by the Commission; and (b) all Administrative Costs have been
paid. Once the Commission has approved the final accounting, the Commission staff will seek
an order from the Commission authorizing: (a) the transfer of the Residual that is infeasible to
return to investors, and any amounts returned to the Fair Fund in the future that is infeasible to
return to investors, to the general fund of the Treasury, subject to Section 21F(g)(3) of the
Exchange Act; (b) discharge of the Fund Administrator; and (c) termination of the Fair Fund.
VII.

NOTICE OF PROPOSED PLAN AND OPPORTUNITY FOR COMMENT

37.
The Notice of the Proposed Plan of Distribution and Opportunity for Comment
(the “Notice”) shall be published on the Commission’s website
https://www.sec.gov/litigation/fairfundlist.htm. Any Person wishing to comment on the Plan
must do so in writing by submitting their comments within 30 days of the date of the Notice (a)
to the Office of the Secretary, United States Securities and Exchange Commission, 100 F Street,
N.E., Washington, D.C. 20549-1090; (b) by using the Commission’s Internet comment form
(www.sec.gov/litigation/admin.shtml); or (c) by sending an e-mail to rule-comments@sec.gov.
Comments submitted by e-mail or via the Commission’s website should include “Administrative
Proceeding File Nos. 3-21836 and 3-21837 in the subject line. Comments received will be
publicly available. Persons should only submit comments that they wish to make publicly
available.

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Exhibit A
PLAN OF ALLOCATION
This Plan of Allocation is designed to compensate a single harmed investor for investment
advisory fees that it paid between July 1, 2020, through March 31, 2021, inclusive (the “Relevant
Period”) due to the Respondents’ misconduct. Based upon records obtained by the Commission during
its investigation, the Fund Administrator has identified the investor who suffered harm as a result of
the Respondents’ violations.
The Fund Administrator will calculate the Eligible Claimant’s Distribution Payment as follows:
1.

Determine the total amount of investment advisory fees paid by the Preliminary
Claimant to the Respondents during the Relevant Period (“Fees Paid”).

2.

Calculate the applicable interest (“Reasonable Interest”) on the Fees Paid using the
Short-term Applicable Federal Rate plus three percent (3%), compounded quarterly
from the end of the Relevant Period through the approximate date of the disbursement
of the funds; and

3.

Combine the Fees Paid and Reasonable Interest to determine the “Loss from Fees.”

To avoid payment of a windfall, the Fees Paid will be reduced by the amount of any
compensation for the loss that resulted from the conduct described in the Orders that was received
from another source (e.g., class action settlement), to the extent known by the Fund Administrator.
Since the Net Available Fair Fund, as defined in the Plan, exceeds the Loss from Fees of the
Eligible Claimant, the Eligible Claimant will receive a payment equal to the amount of their Loss of
Fees, as calculated above.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3A5cc70e44233d5b07. Public record. Not legal advice.