Customers have received $2.7 million in restitution following the recommendations of the Federal Industry Regulatory Authority’s Notice 19-04 released in January. The money came from self-reported lack of supervisory oversight when customers purchased a 529 plan. These plans are often sold to younger people in Pennsylvania or their relatives looking for long-term investments, such as a college education.
What is a 529 plan?
A 529 plan is an investment in a young person’s future educational expenses. These are sold through broker-dealers as municipal securities backed by states, state agencies or educational institutions. Generally, there are two classes of 529 plans sold. Typically, Class A 529 plans have a high front-end sales charge but lower annual fees than Class C 529 Plans that usually have a lower upfront sales fee but a higher annual fee. If you think you may be among those charged the wrong fees, then talking to a FINRA lawyer may help.
What did the brokerages do wrong?
Most of the money came from a financial company that established grids to determine how much a person should invest. They failed, however, to apply the grids to accounts that had already been set up. The company also did not have a backup plan to ensure that broker-dealers used the correct grid to each account.
What else might have been wrong?
Another brokerage failed to educate their brokers well enough in the plan’s details. Therefore, they could not make wise recommendations to their clientele.
The Federal Industrial Regulatory Authority found that 17 firms mishandled 529 accounts. These firms were given a cautionary letter so that they could correct their problems in the future.
It can be challenging to save money. If you have chosen a 529 plan or a similar method and think you made a poor choice, then a lawyer may help you understand your options.