The Securities and Exchange Commission has settled a cease-and-desist proceeding against the Utah Educational Savings Plan Trust (UESP), the first against a 529 plan. The agency has also released an investor education guide that explains the basics that investors should know before saving for college.
The charges against UESP relate to the plan's discovery that its former director, Dale C. Hatch, misappropriated $505,976 of unallocated participant funds into an undisclosed UESP account of his own. While the plan informed participants that the missing funds had been "administrative," the truth is that investors had been harmed by Hatch's actions.
The SEC has ordered UESP to refund these investors and correct the defects in the system that led to the problem in the first place. In addition, the SEC has filed a separate civil action against Hatch, who ended up transferring $85,000 of the funds into a personal bank account.
"The USEP discovered its system for recording and accounting for investor transactions was flawed, but failed to disclose some of those defects and the risks posed to investors," said Kenneth D. Israel, Jr., district administrator of the Salt Lake District Office. "The Commission's action ensures the return of investor funds, that UESP will fix its system, and that material facts related to investor transactions and earnings will be disclosed."