Vanguard, Other BDs Under Scrutiny Over Target Date Fund Tax Bills

In a statement, Galvin said that “financial institutions can’t be permitted to protect one class of investors at the expense of another. Investors need to be made aware of the risks involved and the tax liabilities they could face in certain circumstances, and I want to make sure institutions are being upfront about these risks.”

Galvin wants the broker-dealers to answer questions by Feb. 9.

In a Tuesday letter, Galvin asked the BDs to provide:

• Prospectuses provided to Massachusetts customers for each target date mutual fund;
• Account opening documentation for all Massachusetts customers;
• Marketing materials provided or made available to Massachusetts customers concerning target date mutual funds from Jan. 1, 2020, to the present;
• Marketing materials provided or made available to Massachusetts customers concerning the differences between taxable versus tax-advantaged accounts from Jan. 1, 2020, to the present;
• Compliance policies and written supervisory procedures concerning target-date mutual funds in place from Jan. 1, 2020, to the present;
• Complaints by Massachusetts customers concerning any target date mutual fund identified in response to Request No. 1 from Jan. 1, 2020, to the present;
• Changes to required investment minimums for any target date mutual fund identified over the past two years; and
• Disclosures and/or communications to Massachusetts customers, from Jan. 1, 2020, to the present, regarding the BD’s decision to modify the investment minimum for any target date mutual fund.