Secretary of State Brad Raffensperger announced today that Georgia is among a task-force of state securities regulators and the United States Securities and Exchange Commission (SEC) in a $106 million settlement with Vanguard Marketing Corporation (VMC) and The Vanguard Group, Inc. (Vanguard). The action holds Vanguard in account 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.

The settlement stems from a three-year multistate task force investigation coordinated through the North American Securities Administrators Association’s Enforcement Section Committee, to conduct a comprehensive investigation, parallel to a concurrent investigation by the SEC.
Secretary Raffensperger assured Georgians that the state’s Securities enforcement efforts are among the nation’s best, stating “Our Securities Division goes above and beyond to protect the public, and its’ top priority is to recoup the losses suffered by hardworking Georgians.”

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 which was a consequence of the migration of shareholders from the Investor TRF to the Institutional TRF.

The Vanguard Group, Inc. is the parent company of Vanguard Marketing Corporation, a FINRA- and state-registered broker-dealer. Vanguard markets and sells target retirement funds to investors who hold shares in qualified accounts that offer special tax treatment, including deferred taxes, as well as to investors who hold shares in taxable accounts.

If you have questions or concerns about your investments or financial professional, please contact the Secretary of State’s Securities Division at 470-312-2640 or email [email protected].