Commissioner of Securities and Insurance, James Brown, Announces Settlement with Vanguard Over Target Retirement Fund Distributions

FOR IMMEDIATE RELEASE

Contact: David Sanders
(406) 444-3778

Helena, Montana – James Brown, Commissioner of Securities and Insurance and Montana State Auditor, announced a settlement with Vanguard Marketing Corporation and The Vanguard Group, Inc., resolving an investigation into large, unexpected capital gains tax distributions from Vanguard’s Target Retirement Funds in 2021.

The investigation, conducted in parallel with the U.S. Securities and Exchange Commission (SEC) and other states, focused on Vanguard’s decision in December 2020 to lower the investment minimum for its Institutional Target Retirement Funds. This change prompted significant redemptions from the Investor Target Retirement Funds, resulting in unusually high capital gains distributions to shareholders holding these funds in taxable accounts.

“Montana investors deserve transparency and fair treatment,” said Commissioner Brown. “This settlement ensures that affected investors receive meaningful remediation and that Vanguard improves its practices to protect Montana’s investing public.”

Key findings from the investigation include:

• Vanguard failed to adequately update its analysis of potential tax impacts before recommending the minimum investment reduction, relying on outdated data that did not reflect market rebounds.
• Vanguard did not sufficiently disclose to investors the risk of significant capital gains distributions resulting from the change.
• The firm’s supervisory systems were not reasonably designed to ensure these risks were communicated to decision-makers and investors.

Under the Consent Order:

• Vanguard will pay $135 million in remediation, subject to specific offsets, to a SEC Fair Fund to benefit harmed investors nationwide, including Montana investors.
• Vanguard has paid an additional $13.5 million administrative penalty.
• The settlement resolves Commissioner Brown’s and the CSI’s investigation into this matter, provided Vanguard complies with the terms of the Consent Order.

Commissioner Brown encourages any Montana investors who believe they may have been affected to contact the Office of the Commissioner of Securities and Insurance at 406-444-2040 for more information.

To read the full consent order, click HERE.

The Montana State Auditor, Commissioner of Securities and Insurance, regulates the insurance and securities industries in Montana. The State Auditor is also an ex officio
member of the Montana Board of Land Commissioners. James Brown was elected Montana State Auditor in 2024.

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