Some 9,000 Illinois residents could receive a chunk of a $106 million, multi-state settlement with mutual fund and retirement investor company Vanguard after a lawsuit said the company failed to disclose tax implications of its retirement fund, Illinois Secretary of State Alexi Giannoulis announced Wednesday.
According to the settlement, the Pennsylvania based investment company — a popular choice among employers for employee retirement and investment accounts — failed to disclose potential tax consequences to users, which led to higher capital gains taxes for investors.
In Illinois, it resulted in approximately 9,000 investors paying higher than expected capital gains taxes on some retirement funds, Giannoulias’ office said.
“The Secretary of State’s office is committed to protecting Main Street investors and ensuring that companies operating in Illinois follow securities laws and are held accountable when they fail to do so,” Giannoulias said in the announcement.
The settlement stemmed from a three-year, multi state investigation that ran parallels with a concurrent investigation by the U.S. Securities Exchange Commission, the announcement said. According to officials, the SEC will handle remediation payments and notify investors who were impacted.
According to the announcement, the investigation revealed that in 2020, Vanguard lowered the investment minimum for its Institutional Target Retirement Funds, known as TRFs, from $100 million to $5 million. As a result of the lowered minimums, “a large number of retirement plan investors redeemed their Investor TRF shares to purchase Institutional TRF shares,” the announcement said.
The large number of redemptions ultimately caused Vanguard to sell highly appreciated assets in the Investor TRF, the Giannoulias said, “which triggered significant capital gains taxes for hundreds of thousands of retail investors who remained invested in the Investor TRF.”
According to Giannoulias, Vanguard did not disclose the potential capital gains and tax implications to shareholders.
More than 40 states are part of the settlement, including Illinois, Indiana, Wisconsin and Minnesota, officials said.
How do you know if you are part of the settlement?
According to Giannoulias, the SEC will notify investors who were impacted, and compensate them through its “Fair Fund” program.
It wasn’t immediately clear how much money investors could get, or when they might start seeing funds.
from NBC Chicago https://ift.tt/v4VrubI
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