SEC Moves $84 Million Closer to Investors in UPS, AEP & Andeavor Cases

Key Takeaways

• SEC Advances $84 Million in Investor Compensation Efforts: The Commission moved forward with Fair Fund administration and distribution activities involving UPS, American Electric Power, and Andeavor, covering a combined $84 million in civil penalties.
• UPS Investors Await Approval of $45 Million Distribution Plan: The SEC published a proposed plan to distribute a $45 million Fair Fund established after finding UPS made material misrepresentations related to fair value accounting and reported earnings.
• AEP Distribution Plan Receives Final Approval: The Commission approved a plan to distribute a $19 million Fair Fund to investors who purchased AEP stock between January 2018 and June 2021 and suffered losses tied to allegedly misleading statements regarding Empowering Ohio's Economy.
• Andeavor Case Moves Into Administration Phase: The SEC appointed Epiq Class Action & Claims Solutions to administer a $20 million Fair Fund stemming from a 2020 enforcement action involving stock repurchases conducted while company leadership possessed material non-public information.

Deep Dive

The Securities and Exchange Commission spent the past several weeks figuring out how to return money to investors. The agency advanced distribution efforts in three separate enforcement matters involving United Parcel Service, American Electric Power, and Andeavor, together representing $84 million in civil penalties that the SEC intends to distribute through Fair Funds established under the Sarbanes-Oxley Act.

The actions are procedural. They are also consequential. Enforcement orders may establish liability and penalties, but Fair Funds determine whether harmed investors ultimately receive compensation and under what terms. The largest of the three funds stems from the SEC's case against UPS.

UPS Investors Await Distribution Plan

The Commission announced that its Division of Enforcement has submitted a proposed plan for distributing a $45 million Fair Fund created as part of the SEC's November 2024 settlement with UPS. In that enforcement action, the SEC found that the company failed to adhere to the accounting principle that an asset's fair value should reflect the price that would be received in an orderly transaction between market participants. According to the Commission, those failures resulted in material misrepresentations regarding earnings and other reported financial information.

UPS agreed to pay a $45 million civil penalty. The SEC subsequently established a Fair Fund so those proceeds could be distributed to investors rather than remaining solely with the Treasury. Under the proposed plan, the net available fund (consisting of the penalty amount plus accrued interest and investment income, less taxes and administrative costs) would be distributed to investors who purchased UPS Class A or Class B common stock or certain UPS bonds during the relevant period and sustained recognized losses under the plan's allocation methodology.

The proposal is now open for public comment. Interested parties have 30 days to submit feedback before the Commission decides whether to approve the distribution framework.

AEP Distribution Plan Receives Final Approval

While UPS investors are still in the comment phase, investors in American Electric Power have moved one step closer to receiving compensation. The SEC approved a distribution plan for a $19 million Fair Fund created in connection with its January 2025 enforcement action against the utility holding company.

The Commission found that AEP violated federal securities laws through its relationship with Empowering Ohio's Economy, a Section 501(c)(4) organization that the SEC said the company formed, fully funded, and controlled. According to the order, the company violated Securities Act Section 17(a)(2), Exchange Act reporting provisions, and recordkeeping requirements. The SEC alleged that investors were misled by statements concerning the organization's activities and AEP's relationship with it.

The approved distribution plan covers investors who purchased AEP common stock between January 1, 2018, and June 7, 2021. Compensation will be based on losses associated with share-price inflation allegedly caused by the company's false and misleading statements. Notably, the SEC reported that it received no public comments during the 30-day review period following publication of the proposed plan in May.

With the plan now approved, the case can move into the administration and claims process.

SEC Appoints Administrator in Andeavor Matter

The Commission also took a administrative step in a much older enforcement case involving Andeavor. The SEC appointed Epiq Class Action & Claims Solutions to administer a $20 million Fair Fund established after the agency's 2020 settlement with the company. That case centered on stock repurchases conducted in February and March 2018. According to the SEC, Andeavor repurchased approximately 2.6 million shares while senior leadership possessed material non-public information.

The Commission did not charge insider trading. Instead, it concluded that the company lacked sufficient internal accounting controls to ensure compliance with policies prohibiting share repurchases when material non-public information was known inside the organization.

As part of the new order, Epiq must obtain a $20 million bond and will be responsible for administering the fund under SEC oversight. Administrative expenses will be paid from the Fair Fund subject to Commission approval.

The Long Tail of Enforcement

The three matters illustrate a reality that receives far less attention than the enforcement actions themselves. Large penalties often generate headlines when they are announced. Years can pass before investors see any benefit from them.

The Andeavor case was settled in 2020. AEP's enforcement action was announced in January. UPS resolved its case in November. All three are now somewhere along the same path from penalty collection to investor compensation.

That process rarely produces dramatic headlines. It does, however, determine whether enforcement actions ultimately deliver something beyond punishment. For investors who believe they were harmed, that distinction matters.

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