Vanguard Advisers encouraged advisors to enroll customers in personal financial services without properly disclosing employees’ financial interest to do so, the Securities and Exchange Commission said.
The firm agreed to pay $19.5 million to settle the SEC’s allegations without admitting or denying wrongdoing.
“Vanguard is committed to supporting everyday investors and retirement savers,” the firm said Friday in a statement. “We are pleased to have reached an agreement to put this matter behind us.”
READ MORE:$72M Commonwealth judgment hammers home firms’ disclosure dutiesAdvisory paying $1.4 million for failing to disclose SPAC conflictsMerrill’s $9.5M SEC fine highlights need for advisors to watch basic disclosuresCetera to pay $8.6M as SEC disclosure cases leave lasting impact
From August 2020 through December 2023, the firm incentivized its financial advisors to enroll and retain clients in fee-based services, tying year-end performance goals and bonuses to how advisors kept customers, according to the SEC. The firm didn’t adequately disclose how the advisors were paid, and some disclosures also contained contradictory statements, according to the agency’s cease-and-desist order.
The firm’s website described the advisors as salaried employees who didn’t work on commissions and “no outside incentives, so they’ll always put your interests first.” These statements were removed from the website in 2023, the SEC said.
Empower to pay more than $5.2M over similar allegations
Separately on Friday, two units within the retirement plan recordkeeper Empower agreed to pay a $750,000 penalty and almost $4.5 million in disgorgement and interest to settle allegations that advisors there didn’t fully disclose their compensation to customers saving money in government retirement plans.
The agency said Empower Advisory and Empower Financial Services between July 2019 and December 2022 failed to adequately disclose that their advisors were incentivized by bonuses and raises to enroll customers in fee-based managed account services. This conflict of interest should have been properly flagged, the SEC said.
“The SEC acknowledged Empower’s significant remediation efforts and substantial cooperation with the SEC staff during the investigation,” Empower spokesperson Stephen Gawlik said in a statement. Gawlik said the SEC also didn’t find that any participants were harmed.
“All of the issues identified by the SEC have been fully remediated,” he said.
