New Mexico Joins $106M Vanguard Settlement for Tax Disclosure Failures

press-office

Filed January 28th, 2025

Detected March 17th, 2026

Summary

New Mexico announced it is joining a $106 million settlement with Vanguard Marketing Corporation and The Vanguard Group, Inc. The settlement resolves allegations that Vanguard failed to supervise registered persons and did not disclose potential tax consequences to investors following changes to retirement fund investment minimums. The SEC will administer remediation payments to impacted New Mexico investors.

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What changed

The New Mexico Securities Division, in conjunction with a multistate task force and the U.S. Securities and Exchange Commission (SEC), has announced a $106 million settlement with Vanguard Marketing Corporation and The Vanguard Group, Inc. This enforcement action addresses allegations that Vanguard failed to adequately supervise certain registered individuals and, crucially, failed to disclose the potential capital gains tax consequences to investors when investment minimums were lowered for certain target date retirement funds in 2020. The SEC will manage the distribution of remediation funds to affected New Mexico investors through its Fair Fund program.

Regulated entities, particularly those involved in offering retirement funds or managing investment products, should review their disclosure practices concerning changes in investment minimums and their potential tax implications. While this settlement focuses on Vanguard's specific failures, it highlights the importance of transparent communication with investors regarding tax consequences. Compliance officers should ensure that all disclosures are accurate, complete, and timely, especially when fund structures or investment options are altered. The SEC's involvement suggests a continued focus on investor protection in this area, and firms should be prepared for potential scrutiny regarding similar practices.

What to do next

Review disclosure policies for potential tax consequences related to investment product changes.
Ensure adequate supervision of registered persons involved in fund management and investor communications.
Verify that all disclosures accurately reflect potential capital gains and tax implications for investors.

Penalties

$106 million settlement

Source document (simplified)

New Mexico joins $106 million settlement with Vanguard over big tax bills

SANTA FE — Today, the New Mexico Securities Division, as part of a task force of state securities regulators and the U.S. Securities and Exchange Commissions (SEC), announced a $106 million settlement with Vanguard Marketing Corporation and The Vanguard Group, Inc. (Vanguard) for failing to supervise certain registered persons and failing to disclose potential tax consequences to investors following a change in investment minimums for certain target date retirement funds.

The SEC will notify the New Mexico investors that were impacted by this action and will administer the remediation payments, through its Fair Fund program, to compensate investors for the capital gains taxes.

The settlement stems from a three-year multistate task force investigation coordinated through the North American Securities Administrators Association’s Enforcement Section Committee and a concurrent investigation by the SEC.

The investigation revealed that in 2020, Vanguard lowered the investment minimums and fees for its Institutional Target Retirement Funds (TRFs). As a result of the lowered investment minimums, a large number of retirement investors redeemed their Investor TRF shares to purchase Institutional TRF shares.

The large number of redemptions caused Vanguard to sell highly appreciated assets in the Investor TRF, which resulted in significant capital gains taxes for hundreds of thousands of retail investors who remained invested in the Investor TRF. Vanguard did not disclose potential capital gains and tax consequences to Investor TRF shareholders.

If you have questions or concerns about your investments or financial professional, please contact the New Mexico Securities Division at 505-476-4580.