Today, a significant settlement was announced involving Vanguard Marketing Corporation and The Vanguard Group, Inc. The Office of Financial Regulation (OFR), in collaboration with a task force of state securities regulators and the United States Securities and Exchange Commission (SEC), has reached an agreement for $106 million. This settlement addresses failures in supervising certain registered persons and not disclosing potential tax consequences to investors after changing investment minimums for specific target date retirement funds.
The SEC will manage the distribution of remediation payments through its Fair Fund program to compensate affected investors for capital gains taxes. Florida alone is estimated to have over 10,000 investors eligible for compensation under this settlement.
Russell C. Weigel, III, from the Office of Financial Regulation stated, “The Office of Financial Regulation will continue to work with our partners to strengthen the integrity of the securities marketplace. We remain dedicated to upholding the highest standards of compliance and customer service to Floridians.”
This resolution follows a three-year investigation by a multistate task force coordinated through the North American Securities Administrators Association’s Enforcement Section Committee alongside an SEC investigation. In 2020, Vanguard reduced investment minimums for its Institutional Target Retirement Funds (TRFs). Consequently, many retirement plan investors switched from Investor TRF shares to Institutional TRF shares. This led Vanguard to sell highly appreciated assets in Investor TRF due to numerous redemptions, causing substantial capital gains taxes for many retail investors who remained invested in these funds without being informed about potential tax implications.
Florida residents seeking more information on this settlement can contact the OFR at (850) 487-9687 or visit www.flofr.gov for further assistance regarding financial services companies' licensing status in Florida.