Wealth management giant Vanguard has agreed to pay more than $100 million settle cases In relation to the disclosures surrounding the target date trading, the Securities and Exchange Commission announced on Friday.

The alleged violations stem from a 2020 change in which Vanguard lowered its requirements to sell mutual funds on the day they launch. The SEC’s ruling found that the changes encouraged redemptions as Vanguard customers migrated from certain mutual funds to corporate models, creating tax-deferred shares for those who remained. The SEC said Vanguard failed to adequately disclose the potential impact of the changes in distributions.

“The rule finds that, as a result, investors trading TRFs who did not change and continued to keep their money in taxable accounts were exposed to large dividends and tax liabilities and were deprived of the growth of their wealth. ,” the SEC said in a press release.

A settlement of $106.41 million will be distributed to injured investors, the SEC said. Vanguard agreed to the settlement without admitting or denying the SEC’s findings.

Vanguard is one of the world’s largest wealth managers, reporting more than $10 trillion in global assets as of November. The company was founded by Jack Bogle in the 1970s and is known for being low-cost, investor-friendly.

“Vanguard is committed to helping the more than 50 million everyday savers and retirees who give us their savings. We are pleased to have accomplished this and look forward to continuing to serve our investors with world-class investment solutions,” Vanguard. he said in his voice.

A target date fund is a traditional retirement vehicle designed to gradually transition from a growth to a stable portfolio as the index year approaches. In most cases, this is done by changing riskier styles and focusing more on income-generating bonds as the retirement date approaches.

The payments reflect how investors view the high tax rate even if they themselves do not make any trades during the calendar year. After Vanguard lowered the minimum investment for retirement funds to $5 million from $100 million in December 2020, it encouraged investors to get rid of their mutual funds and exchange them with institutions, according to the SEC. .

Vanguard then had to sell assets to shareholders to meet redemptions from those leaving, the SEC found. As a result, the owners who remained in the investor share group got a huge profit – and tax liability if he kept the money in a taxable account, according to the plan.

In most cases, expected-date funds remain in tax-exempt accounts such as 401(k) plans or retirement accounts — which can avoid the tax fallout from large distributions of profits.

The SEC order said that the funds that Vanguard traders dealt with redeemed $ 130 billion from December 2020 to October 2021, up from $ 41 billion in the same period last year. Vanguard later merged the two funds together, which the SEC order said the company refused to do to save the fees.

Jeff DeMaso, a Vanguard analyst at Independent Vanguard Adviser, said he believed the $106 million payout was the largest payout ever paid to a Pennsylvania asset manager.

The settlement announced Friday is in addition to the $40 million Vanguard agreed to pay to investors as part of a class-action suit.

The time frame for changing your target mutual fund is the same as other Vanguard’s current policy. In 2023, Vanguard was paid $800,000 and the Financial Industry Regulatory Authority regarding financial market accounting issues in 2019 and 2020.

The alleged violations occurred under CEO Tim Buckley. The current CEO, Salim Ramji, joined Vanguard from BlackRock in 2024.

– CNBC’s Scott Schnipper contributed reporting.