Regulatory Notice 19-04

FINRA’s 529 Plan Share Class Initiative Encourages Firms to Self-Report Potential Violations

Summary

Over the past several years, FINRA has found that some firms have failed to reasonably supervise brokers’ recommendations of multi-share class products. FINRA has raised concerns specifically regarding firms’ supervision of share-class recommendations to customers of 529 savings plans (“529 plans”).

FINRA is launching a 529 Plan Share Class Initiative to promote firms’ compliance with the rules governing 529 plan recommendations, to promptly remedy potential supervisory and suitability violations related to recommendations that customers of 529 plans buy share classes that are inconsistent with the accounts’ investment objectives, and to return money to harmed investors as quickly and efficiently as possible. As described in this Notice, to encourage voluntary reporting under this initiative, FINRA’s Department of Enforcement (Enforcement) will recommend that FINRA accept favorable settlement terms for firms that self-report these potential violations and provide FINRA with a detailed remediation plan.

Questions concerning this Notice should be directed to:

  • Christopher Kelly, Senior Vice President, Enforcement, at (732) 596-2082; or
  • Christopher Burky, Senior Director, Enforcement, at (312) 899-4348.