Attorney General Alan Wilson announced that the South Carolina Attorney General’s Office has joined a $106 million settlement with Vanguard Marketing Corporation and The Vanguard Group, Inc. This settlement involves a task force of state securities regulators and the United States Securities and Exchange Commission (SEC) following an investigation into supervision failures and undisclosed tax consequences related to investment minimum changes.
The investigation, conducted over three years in coordination with the North American Securities Administrators Association’s Enforcement Section Committee, uncovered issues stemming from Vanguard’s 2020 decision to lower investment minimums for its Institutional Target Retirement Funds (TRFs). This change prompted many retirement plan investors to switch from Investor TRF shares to Institutional TRF shares, leading to significant capital gains taxes for those who remained invested in the Investor TRF. The potential tax implications were not disclosed by Vanguard to these shareholders.
Vanguard Group, Inc., which oversees Vanguard Marketing Corporation, faced scrutiny for its handling of target retirement funds marketed to investors with both qualified accounts offering deferred taxes and taxable accounts. Historically, capital gains distributions for Investor TRFs were minimal; however, this situation changed due to the migration between fund types.
The SEC will manage remediation payments through its Fair Fund program to compensate affected investors for incurred capital gains taxes. Impacted investors will be notified directly by the SEC regarding these payments.
For further information or assistance, individuals can contact the Securities Division at 803-734-9916 or via email at [email protected]. Additional resources are available on the Attorney General’s Office website.
