Judge Rejects Vanguard $40 Million Capital Gains Tax Class Deal

In a move that blocks Vanguard Group Inc. from offsetting a US Securities and Exchange Commission settlement by $40 million, a Pennsylvania federal judge sided with investors and denied Vanguard’s proposed settlement with investors in a mutual fund.

The proposed $40 million settlement provided no value to the class of harmed investors, who allege they had to pay surprise capital gains taxes because of how the firm restructured the funds, because they’d lose $13 million to attorneys’ fees if the court approves it. If the court rejects it, they receive that $13 million through an SEC settlement, according ...