Malvern-based Vanguard Group is currently facing a $106 million fine for allegedly misleading retail investors in targeted retirement funds, writes Jeff Blumenthal for the Philadelphia Business Journal.
According to the Securities and Exchange Commission, the alleged violations started on Dec. 11, 2020, when the investment giant reduced the minimum initial investment for the Vanguard Institutional Target Retirement Funds from $100 million to $5 million.
This change led many retirement plan investors to switch to institutional funds due to their lower expenses. That created taxable distributions for some remaining shareholders in the original retirement funds.
This resulted in retail investors of Target Retirement Funds who did not move their money facing “historically larger capital gains distributions and tax liabilities and were deprived of the potential compounding growth of their investments,” said the SEC.
The SEC alleges that the prospectuses for Vanguard’s Target Retirement Funds, distributed in 2020 and 2021, were materially misleading and failed to disclose the risk of increased capital gains.
The $106.41 million fine will be allocated to harmed investors. Vanguard neither admitted nor denied the SEC’s findings in agreeing to the fine.
Read more about Vanguard Group and its retirement funds in the Philadelphia Business Journal.
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