SEC Fines Vanguard $19.5 Million for Disclosure Failures in Advisor Compensation Program
From the desk of Jim Eccleston at Eccleston Law
The Securities and Exchange Commission (SEC) has censured and fined Vanguard Advisers $19.5 million, alleging the firm failed to properly disclose financial incentives tied to its Personal Advisor Services (PAS) program.
According to the SEC’s cease-and-desist order, from August 2020 through December 2023, Vanguard promoted PAS advisors as salaried employees who had “no financial incentives to recommend certain products.” AdvisorHub reports that, in reality, bonuses and raises depended in part on enrolling and retaining clients in PAS, creating conflicts of interest that were not fully disclosed.
While Vanguard acknowledged some incentive structures in its Form ADV supplement, the SEC found that other disclosures—including the required customer relationship summaries and Form ADV brochure—contradicted those statements. According to AdvisorHub, those materials claimed that PAS advisors received no additional compensation. The SEC also determined that Vanguard lacked written policies and procedures reasonably designed to prevent misleading disclosures or to address conflicts arising from its compensation structure.
According to AdvisorHub, PAS blends the services of a Certified Financial Planner with a digital money management platform, offering investment recommendations to retail investors with at least $50,000 in assets. Advisors working with high-net-worth clients were eligible for discretionary bonuses, while those serving mass affluent clients could receive merit raises. Both forms of compensation, however, depended on meeting client enrollment and retention metrics, which directly influenced salary increases and bonus ranges.
Vanguard resolved the matter without admitting or denying the SEC’s findings. The firm cooperated with the investigation, updated its disclosure documents by the end of 2023, and engaged a consultant to review its conflict identification process.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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