In the Matter of The Vanguard Group, Inc.

Admin. Proc. File No. 3-22435

On January 17, 2025, the Commission instituted and simultaneously settled administrative and cease-and-desist proceedings (the “Order”) against The Vanguard Group, Inc. (“Vanguard” or the “Respondent”). In the Order, the Commission found that Vanguard made misleading statements concerning potential tax consequences to investors in the Vanguard Investor Target Retirement Funds (“Investor TRFs”) in taxable accounts. In November 2020, Vanguard made a recommendation to lower the minimum initial investment amount for a separate series of Vanguard target date retirement funds designed for institutional investors (“Institutional TRFs”) that resulted in historically larger capital gains distributions and tax consequences for certain retail investors in the Investor TRFs who held them in taxable accounts. According to the Order, Vanguard distributed misleading statements in prospectuses for Investor TRFs, stating the funds’ distributions may be taxable as ordinary income or capital gains, and that capital gains distributions may vary considerably from year to year as a result of the funds’ “normal” investment activities and cash flows. These representations failed to disclose the potential for increased capital gains distributions resulting from the redemptions of fund shares by newly-eligible investors switching from the Investor TRFs to the Institutional TRFs to benefit from the lower expense ratios of the Institutional TRFs as a result of the lowered minimum investment. The Commission further found that Vanguard failed to adopt and implement written policies and procedures reasonably designed to prevent violations of the Advisers Act and rules thereunder with respect to the accuracy of the funds’ disclosures.

The Commission found that Vanguard violated the Advisers Act and caused violations of the Securities Act and the Investment Company Act. The Commission also created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, so penalties can be distributed to those harmed by the Respondent’s conduct described in the Order (the “Fair Fund”). Without admitting or denying the Commission’s findings, Vanguard agreed to be censured, cease and desist from future violations, and pay $18.2 million in disgorgement and prejudgment interest and a $13.5 million civil penalty. The disgorgement and prejudgment interest were deemed satisfied by Vanguard’s payment of a $92.91 million settlement with state regulators, which was received and accepted by the Fair Fund. See the Commission’s Order: Release No. 33-11359.

On May 9, 2025, the Commission issued an order appointing Miller Kaplan Arase LLP, as the Tax Administrator of the Fair Fund.  See the Commission’s Order:  Release No. 34-103020

For more information, please contact the Commission:

Office of Distributions
Email: ENFOfficeofDistributions@sec.gov