Vanguard Group will pay more than $106 million (R$644 million) to settle US Securities and Exchange Commission (SEC) charges that it made misleading statements about capital gains distributions and tax consequences to retail investors who held Popular target date pension funds in taxable accounts.
The company announced in December 2020 that it would reduce the minimum initial investment for its Vanguard Target Institutional Pension Funds. The SEC says that to meet demand, a pension fund other than Vanguard had to sell underlying assets at a gain as financial markets recovered from their lows during the pandemic.
As a result, retail investors in Vanguard Target Pension Funds who continued to hold their shares in taxable accounts faced historically higher capital gains distributions and tax liabilities, according to the agency.
“Materially accurate information about capital gains and tax implications is critical for investors saving for retirement,” Corey Schuster, chief of the asset management unit of the SEC Division of Enforcement, said in a statement. “Companies must ensure they are accurately describing to investors the potential risks and consequences associated with their investments.”
The settlement will be distributed to affected investors through a Fair Fund, the SEC said.
“Vanguard is committed to supporting the more than 50 million investors and retirement savers who trust us with their savings. We are pleased to have reached this agreement and look forward to continuing to serve our investors with world-class investment options,” the company said in a statement.
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