Georgia is part of a state-federal task force of securities regulators that reached a $106 million settlement with Vanguard Marketing Corporation and The Vanguard Group, Secretary of State Brad Raffensperger announced today.
“Our Securities Division goes above and beyond to protect the public, and its top priority is to recoup the losses suffered by hardworking Georgians,” Raffensperger said.
The settlement follows an investigation by state regulators and the U.S. Securities and Exchange Commission (SEC), coordinated by the North American Securities Administrators Association’s Enforcement Section Committee.
The investigation, which spanned three years, found that Vanguard allegedly failed to properly supervise certain registered persons and neglected to disclose the potential tax consequences of changes made to its TRF offerings.
Specifically, in 2020, Vanguard reduced the investment minimums for its Institutional Target Retirement Funds, causing many retail investors to sell shares in the Investor TRF and buy shares in the Institutional TRF.
This influx of redemptions led Vanguard to sell appreciated assets in the Investor TRF, triggering significant capital gains taxes for investors who remained in those funds. Vanguard did not adequately inform its investors of the potential tax liabilities associated with this shift, which directly impacted hundreds of thousands of retail investors.
Raffensperger said Georgia’s Securities Division is committed to protecting investors, particularly hard working Georgians, and securing compensation for any losses they incurred as a result of Vanguard’s actions. The $106 million settlement aims to recoup those losses and address the broader regulatory failures associated with Vanguard’s handling of its TRF offerings.
Vanguard, which is also the parent company of Vanguard Marketing Corporation, is a prominent financial services firm that markets and sells retirement funds to investors, including those with tax-deferred and taxable accounts.
