Fund provider reaches multi-million dollar settlement over regulatory charges

In one instance, the Vanguard Target Retirement 2040 Fund threw off 15.1% of its net asset value as capital gains in 2021, up from just 0.4% a year earlier.

“These extraordinary capital gains were caused by Vanguard’s conscious decision to benefit ultra-wealthy shareholders over Main Street investors,” Galvin said in a statement reported by Reuters.

Vanguard, which as of March had US$8.1 trillion in AUM, did not admit wrongdoing in agreeing to settle. The payout includes $5.5 million to reimburse Massachusetts investors holding more than 5,000 taxable accounts, plus $750,000 to the state.

“We are glad to put this matter behind us and avoid the cost and distraction of a protracted process,” Vanguard said in a statement. “We remain committed to reducing the cost and complexity of investing to help more Americans reach their financial goals.”

Vanguard faces related class-action litigation in Philadelphia federal court brought on behalf of investors nationwide in its target-date funds.