North Dakota – The North Dakota Securities Department announced its participation in a $106 million settlement with Vanguard Marketing Corporation and The Vanguard Group Inc. (Vanguard). The settlement addresses the company’s failure to supervise certain registered persons and disclose potential tax consequences to investors following a change in investment minimums for certain target date retirement funds.

This settlement comes after a three-year investigation led by a task force of state securities regulators and the U.S. Securities and Exchange Commission (SEC). The task force’s investigation, conducted alongside the SEC’s parallel probe, focused on Vanguard’s failure to properly notify investors of tax consequences.

In 2020, Vanguard lowered the investment minimums for its Institutional Target Retirement Funds (TRFs), leading many retirement plan investors to redeem their Investor TRF shares to purchase Institutional TRF shares.

This caused Vanguard to sell appreciated assets in the Investor TRF, triggering significant capital gains taxes for those who remained invested in the fund. Vanguard failed to inform investors about the potential tax implications of this move.

Commissioner Tim Karsky commented, “This settlement ensures that investors who were harmed by Vanguard’s actions will see relief. We are proud of the collaboration of state and federal securities regulators to achieve this resolution.”

The SEC will notify the impacted investors and administer the remediation payments through its Fair Fund program to compensate them for the capital gains taxes.