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Vanguard Agrees to $106.4 Million Settlement With SEC Over Misleading Statements on Capital Gains and Tax Consequences

Jan 17, 2025, 06:30 PM

The Vanguard Group has agreed to pay $106.4 million to settle charges brought by the U.S. Securities and Exchange Commission (SEC) and state regulators over misleading statements related to capital gains distributions and tax consequences for retail investors. The allegations stem from a 2020 change where Vanguard lowered the minimum investment requirement for its institutional target date funds, which led to redemptions and subsequent taxable distributions for investors who did not switch to the institutional versions. The SEC stated that this resulted in retail investors facing historically larger capital gains distributions and tax liabilities, impacting the potential compounding growth of their investments in target-date retirement funds held in taxable accounts. The settlement will see the fine distributed to affected investors, and Vanguard has agreed to the penalty without admitting or denying the SEC's findings. Over 10,000 investors in Florida are among those eligible for compensation as part of this settlement.