William Galvin, Massachusetts' top securities regulator, said Tuesday that he had launched an investigation into the purchase of target date mutual funds by Massachusetts customers in taxable accounts at five broker-dealers — T. Rowe Price Investment Services, American Fund Distributors, BlackRock Investments, Fidelity Brokerage Services and Vanguard Marketing Corp.
Galvin said that he's particularly concerned by reports of inadequately disclosed fund changes that shifted financial burdens to small-dollar investors, resulting in large tax bills for those who held the funds in non-retirement accounts.
The Massachusetts Securities Division "is looking at issues like those that recently happened with Vanguard," a spokesperson for Galvin's office told ThinkAdvisor Tuesday in an email.
"Vanguard reduced the minimum investment in its institutional target retirement funds from $100 million to $5 million, causing many plans to switch from the standard funds to the institutional target funds," the spokesperson said. "That caused the standard funds to offload holdings, triggering capital gains distributed to the smaller dollar investors who remained, and some of those investors had the funds in taxable accounts."