Vanguard Advisers Inc. has agreed to a $19.5 million settlement with the U.S. Securities and Exchange Commission after the agency accused the firm of hiding conflicts of interest tied to its popular managed account service.
The SEC alleged Vanguard misled clients between 2020 and 2023 about how its financial advisers were incentivized to push customers into its Personal Advisor Services (PAS) program, which generates ongoing fees.
Conflicting Disclosures Exposed
PAS advisers, according to the SEC, were eligible for bonuses, raises, and promotions depending on how many clients they signed up and retained. Yet Vanguard’s official disclosures painted a contradictory picture.
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Brochures admitted some incentive structures existed.
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Other documents and website claims insisted advisers had “no outside incentives” and acted only in clients’ best interests.
The SEC said this web of conflicting disclosures masked real financial motivations and breached the Advisers Act.
A Pattern of Regulatory Trouble
The settlement not only includes the multimillion-dollar penalty but also a formal censure against Vanguard. The firm also agreed to adopt stronger compliance procedures.
This deal follows a $106.4 million settlement in January, when Vanguard was forced to resolve allegations it misled retirement investors about unexpected capital gains taxes triggered by restructuring its Target Retirement Funds.
