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Maryland AG joins $106 million multistate settlement with Vanguard

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CBS News Baltimore Live

BALTIMORE -- Maryland Attorney General Anthony Brown joined a $106 million multistate settlement with Vanguard over big tax bills, the AG said Wednesday.

According to the settlement, Vanguard failed to properly disclose tax implications when it lowered investment minimums for its Institutional Target Retirement Funds in 2020, triggering significant capital gains taxes for hundreds of thousands of retail investors.

"Marylanders who entrust their hard-earned money to investment firms deserve transparency and fairness-not surprises that cost them thousands in unexpected taxes," Attorney General Brown said. "This settlement sends a clear message: we will hold companies accountable when they put profits over the interests of everyday investors." 

According to the investigation, Vanguard lowered investment minimums for its Institutional Target Retirement Funds mutual fund, which was historically purchased by institutional investors. The lowered investment minimums caused numerous retirement plan investors to redeem their investor TRF shares to purchase TRF shares. 

When retirement plan investors moved to the newly accessible institutional funds, it forced the sale of highly appreciated assets in the original investor funds, creating unexpected tax burdens for remaining shareholders, according to the AG.

The SEC will notify impacted investors and compensate them with remediation payments through its Fair Fund program. The settlement covers both The Vanguard Group, Inc. and its subsidiary, Vanguard Marketing Corporation, a registered broker-dealer.

Maryland investors are encouraged to contact the state's Securities Division at 410-576-6300.

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