Vanguard Social-Investing Error Prompts Funds to Check Controls

Managers overseeing trillions in exchange-traded funds have been quietly meeting around Wall Street this week to check the quality controls on their funds, rattled after Vanguard Group Inc. mistakenly added shares of 11 companies, including a gun manufacturer and a private prison operator, to its $578 million socially responsible ETF.

Vanguard apologized to investors, citing a mistake in the underlying index provided by FTSE Russell, and both companies are adding new controls in the aftermath of the error, according to Vanguard spokeswoman Carolyn Wegemann. FTSE has agreed to provide justification for all future additions to its ESG benchmarks, and Vanguard ...