Vanguard Settles SEC Charges, Pays $106 Million Fine

The Vanguard Group has agreed to pay $106.41 million to settle charges from the SEC for misleading statements regarding capital gains distributions and tax consequences for its Target Retirement Funds (TRFs). The SEC found that in December 2020, Vanguard reduced the minimum investment for its Institutional TRFs, prompting many investors to switch funds, which resulted in significant capital gains taxes for those who sold shares. Retail investors who remained in the Investor TRFs faced larger capital gains distributions and were deprived of potential growth. Vanguard's prospectuses were deemed misleading as they failed to disclose the risk of increased capital gains due to redemptions. In addition to the SEC settlement, Vanguard will pay $40 million to settle a class action lawsuit and has committed to enhancing its transparency practices moving forward. The settlement funds will be distributed to affected investors through a Fair Fund.