A settlement has been reached in a class-action lawsuit filed by a group of investors against Vanguard Group, reports ThinkAdvisor. The details were disclosed in a federal court in Philadelphia last week.
Vanguard has agreed to pay $40 million to settle the suit that was filed after the firm’s December 2020 decision to reduce the minimum investment in lower-cost funds meant for institutional clients to $5 million from $100 million.
Investors said this caused a “stampede” into the lower-cost funds, forced higher-cost retail funds to sell assets to meet redemptions of retirement plan shares, and left investors who did not qualify for the lower-cost funds facing major capital gains in their taxable brokerage accounts. The plaintiffs noted that target-date funds usually have minimal capital gains distributions. The lawsuit was filed in March 2022 by retail investors Valerie M. Verduce, Catherine Day and Anthony Pollock.
in late September, the two sides in the case notified the court that they had reached a settlement in principle to resolve all claims after mediation, and that they needed time to work out the details.
“Vanguard is committed to supporting everyday investors and retirement savers and is happy to have reached an agreement that allows us to put this litigation behind us,” Vanguard said in a statement to ThinkAdvisor.
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