Vanguard, a major mutual fund company, has agreed to pay $106 million in damages to resolve an investigation by securities regulators into whether it misled retail investors about the tax implications of changes to some of its retirement funds.
The SEC announced the settlement on Friday, along with a series of other settlements that Gary Gensler reached with the company in his final days as SEC chairman. He will formally resign on Monday.
The settlement with Vanguard is part of a multi-state investigation led by New York, New Jersey and Connecticut, as well as other regulators.
The joint investigation found that Vanguard failed to notify some investors of changes to the terms of some of its retirement funds. The changes result in hundreds of thousands of individual investors holding money in taxable accounts facing higher capital gains taxes. In New York alone, Vanguard’s failure to disclose the changes resulted in more than 15,000 residents paying higher-than-expected capital gains, according to the New York Attorney General’s Office.
Vanguard neither admitted nor denied wrongdoing in settlement with regulators, but was reprimanded by SEC
Regulators said the Vanguard Investor Target Retirement Fund’s 2020 and 2021 prospectuses contained misleading statements. The company was accused of failing to inform retail investors of changes in the fund’s terms, which prompted institutional investors to move funds to another investment fund and resulted in “historically larger capital gains” for retail investors who did not transfer funds.
The $106 million will be put into a fund to be distributed to affected investors. The SEC said the amount is in addition to a $40 million settlement Vanguard reached with investors in a related class action lawsuit.
Vanguard spokesman Netanel Spero said the company has more than 50 million investors and is “pleased to have reached this settlement.”
Securities and Exchange Commission commissioners met Thursday to approve the Vanguard and other settlements — the regulator’s last such meeting with Mr. Gensler. He has said he will resign after President-elect Donald J. Trump takes office.
Trump nominated Paul Atkins, a pro-business conservative and former SEC commissioner, to lead the agency. No hearings on his nomination have yet been scheduled.
Here are three other settlements announced by the SEC in the past two days:
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Hedge fund Two Sigma has paid $165 million in restitution and agreed to pay a $90 million civil penalty to resolve an investigation into allegations that it took four years to resolve two cases on which it relied for its investment decisions. model problem. (The company previously paid part of the compensation.) The problem was discovered by two employees at the firm, which manages about $60 billion of investor money.
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GrubMarket, an e-commerce company that offers organic food, agreed to pay an $8 million fine to end an SEC investigation after it found the privately held company overstated its long-term revenue by $550 million. The U.S. Securities and Exchange Commission said the company had raised $80 million from investors through a private placement that included inflated revenue figures.
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Brokerage and investment firm LPL Financial agreed to pay an $18 million fine to the SEC to resolve an investigation into allegations that the company did not address issues with its anti-money laundering program quickly enough. The SEC found that the company did not quickly close accounts when it could not verify a customer’s identity.
On all issues, the companies settled with the commission without admitting or denying wrongdoing.
