RCA - Fall 2002 - Municipal Fund Securities – Section 529 College Savings Plans – Qualifications – New Limited Principal Examination

Section 529 College Savings Plans are higher education savings plan trusts established under Section 529(b) of the Internal Revenue Code as "qualified tuition programs." The plans include interests in pooled investment funds under trusts established by states or local governmental entities, as well as higher education savings plan trusts established by states. Although these plans have investment features similar to mutual funds or variable annuities, they are municipal securities. Accordingly, the purchase and sale of state-sponsored Section 529 Plans are governed by the rules of the Municipal Securities Rulemaking Board (MSRB).


The MSRB has amended its Rule G-3. MSRB Rule G -3 governs the qualification requirements of principals supervising municipal securities business. Under MSRB Rule G-3 previously in effect until December 31, 2002, if a firm's municipal securities activities are limited exclusively to municipal fund securities, the firm may fulfill its obligation to have a municipal securities principal by designating either an investment company/variable contracts limited principal (Series 26) or a general securities principal (Series 24) to act as a municipal fund securities limited principal. At the end of this transition period, the municipal securities principal would have to be qualified either as a Municipal Fund Securities Limited Principal (Series 51), or a municipal securities principal (Series 53).


The amendment to MSRB Rule G-3 extends until March 31, 2003, the transition period during which Series 24 and Series 26 principals may continue to supervise municipal fund securities activities without further qualification. Under the amendment, all municipal fund securities limited principals will be required to have taken and passed the Series 51 examination by April 1, 2003 (a Series 53 municipal principal examination also satisfies this requirement). In addition, the amendment announced that the administration of the new Series 51 Municipal Fund Securities Limited Principal Examination would begin on or about January 1, 2003.


If you have any questions, please contact Malcolm Northam, NASD Member Regulation, at (202) 728-8085.


Discontinuation of RCA
Please note that at the end of 2002, NASD will no longer publish the RCA. It will be prepared and disseminated as a Web-based publication.