The Financial Industry Regulatory Authority (FINRA) has censured and issued a US$800,000 (AU$1.2 million) fine to Vanguard Group, after it reportedly found errors in 8.5 million customer account statements.
Specifically, Vanguard Marketing Corporation (VMC) was found to have overstated projected yield and projected annual income for nine money market funds from November 2019 to September 2020.
“From at least October 2019 to June 2021, certain VMC account statements inaccurately presented market appreciation/depreciation and investment returns,” a FINRA filing published on 25 May stated.
This included displaying an estimated yield of 1.87 per cent for the Vanguard Federal Money Market Fund in September 2020 before the “error was corrected” in October 2020 — reduced to an estimated yield of 0.06 per cent.
According to FINRA, VMC also failed to “reasonably supervise” its account statements by “failing to timely address customer reports of inaccuracies”.
“FINRA Rule 3110(a) requires each member firm to establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules,” the regulator stated.
“A firm’s duty of supervision includes the responsibility to reasonably investigate red flags that suggest misconduct may be occurring.”
Ultimately, Vanguard’s shortcomings were deemed to have “mislead” VMC customers.
FINRA first became aware of the issue by VMC, which “accepts and consents” to the regulator’s findings.
“Respondent agrees to pay the monetary sanction upon notice that this AWC has been accepted and that such payment is due and payable,” FINRA stated.
“…Respondent specifically and voluntarily waives any right to claim an inability to pay, now or at any time after the execution of this AWC, the monetary sanction imposed in this matter.”
