$106 Million Multistate Settlement Reached with Vanguard

Tallahassee, Fla. — Today, the Office of Financial Regulation (OFR), as part of a task force of state securities regulators, and the United States Securities and Exchange Commission (SEC) announced a $106 million settlement agreement with Vanguard Marketing Corporation and The Vanguard Group, Inc. (Vanguard) for failing to supervise certain registered persons and failing to disclose potential tax consequences to investors following a change in investment minimums for certain target date retirement funds. 

Florida is estimated to have more than 10,000 Florida investors who may be eligible for compensation under the settlement. The SEC will notify the investors impacted by this action and administer the remediation payments through its Fair Fund program to compensate investors for the capital gains taxes.

“The Office of Financial Regulation will continue to work with our partners to strengthen the integrity of the securities marketplace,” said Russell C. Weigel, III. “We remain dedicated to upholding the highest standards of compliance and customer service to Floridians.”  

The settlement stems from a three-year multistate task force investigation coordinated through the North American Securities Administrators Association’s Enforcement Section Committee and a concurrent investigation by the SEC. The investigation revealed that in 2020, Vanguard lowered the investment minimums for its Institutional Target Retirement Funds (TRFs). As a result of the lowered investment minimums, many retirement plan investors redeemed their Investor TRF shares to purchase Institutional TRF shares. The large number of redemptions caused Vanguard to sell highly appreciated assets in the Investor TRF, which triggered significant capital gains taxes for hundreds of thousands of retail investors who remained invested in the Investor TRF. Vanguard did not disclose the potential capital gains and tax implications to Investor TRF shareholders.

Florida residents with questions about the settlement should contact the OFR at (850) 487-9687. Floridians can also visit www.flofr.gov to verify that a financial services company is licensed to do business in Florida and view past enforcement actions.