The settlement stemmed from Vanguard's December 2020 decision to reduce the minimum investment in lower-cost fund classes meant for institutional clients to $5 million from $100 million.

This led many investors who qualified for those funds to shift from higher-cost retail fund classes.

The SEC said the retail funds were then forced to sell assets to meet redemptions, and pass large tax burdens from capital gains to the remaining investors.

While Vanguard did warn target-date fund investors their tax burdens could change from year to year, it did not warn of that risk for when investors shifted to institutional funds from retail funds, the SEC said.

Vanguard's target-date funds contain mixes of stocks, bonds and cash that are designed to become less risky as investors age. They are also designed to be tax-efficient.

The payout includes $92.9 million of restitution, plus a $13.5 million civil fine. Vanguard did not admit or deny wrongdoing in agreeing to settle.

"Materially accurate information about capital gains and tax implications is critical to investors saving for their retirements," Corey Schuster, chief of the SEC enforcement division's asset management unit, said in a statement.

In a statement, Vanguard said it was pleased to settle, and "committed to supporting the more than 50 million everyday investors and retirement savers who entrust us with their savings."

The settlement also resolved claims by a coalition of regulators in 43 U.S. states, Washington, D.C. and the U.S. Virgin Islands, which was led by the attorneys general of New York and New Jersey and the Connecticut Department of Banking.

In November, Vanguard agreed to pay $40 million to settle similar claims in a lawsuit by fund investors. It also agreed to pay $6.25 million in July 2022 to resolve similar claims by Massachusetts Secretary of State William Galvin.

The Valley Forge, Pennsylvania-based company, had $10.4 trillion of assets under management as of Nov. 30, 2024.