FINRA Urges Self-Reporting of 529 Savings Plans Violations
Commentary by Steven Lofchie
FINRA launched a new self-reporting initiative to promote firm compliance with suitability requirements related to transactions in 529 savings plans.
FINRA stated that it is establishing a 529 Plan Share Class Initiative to "promptly remedy potential supervisory and suitability violations related to recommendations that customers of 529 savings plans buy share classes that are inconsistent with the accounts' investment objectives." To encourage voluntary reporting under this new initiative, FINRA's Department of Enforcement will recommend favorable settlement terms for firms that (i) self-report these potential violations and (ii) give FINRA comprehensive plans regarding remediation.
Commentary
FINRA had recently launched a similar self-reporting initiative as to recommendations to purchase certain share classes issued by mutual funds. It may be expected that firms that fail to self-report will risk disciplinary actions. See, e.g., Three Investment Advisers Settle Share Class Selection Disclosure Violations.