SEC Orders Investment Adviser to Return Funds to Public Pension and Employee Benefit Plan Clients Harmed by Share Class Selection Disclosure Violations
June 2, 2020
File No. 3-19820
June 2, 2020 - The Securities and Exchange Commission today announced that William Vescio, the owner and president of Vescio Asset Management, LLC, an entity providing advisory services and formerly brokerage services to Pennsylvania and West Virginia municipal and county pension and employee benefit plans, has agreed to settle charges arising out of his mutual fund share class selection disclosure practices.
The SEC's order finds that Vescio failed to adequately disclose the conflicts arising from his selection of a mutual fund share class that charged higher 12b-1 fees, the majority of which Vescio received, instead of a lower-cost share class of the same funds that was available to clients. In addition, the order finds that Vescio breached his duty to seek best execution for his clients by causing clients to invest in a fund share class that charged higher 12b-1 fees when a share class of the same funds that presented a more favorable value for these clients under the particular circumstances in place at the time of the transactions was available to the clients. According to the SEC's order, Vescio, when making fee disclosures for certain clients, also failed to disclose to these clients that they were paying 12b-1 fees in addition to the mutual funds' underlying expenses.
The order finds that Vescio violated the antifraud provisions of Section 206(2) of the Investment Advisers Act of 1940 and Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933. Without admitting or denying the findings, Vescio will pay disgorgement of $275,000, prejudgment interest of $7,631, and a civil money penalty of $40,000. Vescio has agreed to distribute the funds to harmed investors. Vescio also agreed to comply with certain undertakings, to a censure, and to cease-and-desist from future violations.
The SEC's investigation was conducted by Suzanne C. Abt and Scott A. Thompson, with assistance from Karen Klotz, of the Philadelphia Regional Office, and supervised by Kelly L. Gibson. The examination that led to the investigation was conducted by William McIntyre, Edward T. Flaherty, Brian Carroll, and Diane Hagy of the Philadelphia Regional Office.