Asset manager Vanguard has been fined $106.41 million by the U.S. Securities and Exchange Commission (SEC) over disclosures concerning target date retirement funds.
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The SEC says that Vanguard violated securities laws when it lowered the minimum investment requirement for its institutional target date funds. The SEC found that the change spurred redemptions as Vanguard customers moved from older target date funds into the new ones offered by the company, creating taxable distributions for many of its clients.
The SEC says Vanguard failed to properly disclose the potential impact of the change in its target date retirement funds, leaving many of its clients with hefty tax bills as a result. “The order finds that retail investors in taxable accounts faced historically larger capital gains distributions and tax liabilities,” the SEC wrote in a news release.
Distributions to Investors
The fine that Vanguard pays will not be made to the SEC, but rather be distributed to investors who were harmed. Vanguard is one of the world’s largest asset managers, with more than $10 trillion of assets under management. The firm was founded by legendary investor Jack Bogle in the 1970s and has a reputation for offering low-cost exchange-traded funds (ETFs) to investors.
Target date retirement funds are a popular savings vehicle designed to slowly shift capital from a growth-oriented portfolio to a more conservative portfolio as the date of a person’s retirement draws near. Typically, this is done by replacing stocks with greater exposure to bonds and money market funds. Most of Vanguard’s target date retirement funds are held in tax-deferred 401(k) plans.
Is the Vanguard S&P 500 ETF a Buy?
Vanguard is not a publicly traded company. So instead we look at the company’s flagship fund, the Vanguard S&P 500 ETF (VOO). As one can see below, the ETF has a consensus Moderate Buy rating among 504 Wall Street analysts. That rating is based on 402 Buy, 95 Hold, and seven Sell recommendations issued in the last three months. The average VOO price target of $623.10 implies 13.24% upside from current levels.
