The Financial Industry Regulator Authority ordered three Advisor Group broker-dealers to pay restitution to clients for deficiencies in their supervisory systems related to 529 plan rollovers, InvestmentNews reports.
FINRA said the firms, Securities America Inc., Royal Alliance Associates, Inc. and SagePoint Financial Inc., failed to waive sales charges as required for some clients when rolling over the college savings plans from one state to another. According to a letter of acceptance, waiver and consent, the firms did not admit or deny the findings but agreed to a censure. In addition, Royal Alliance was ordered to make restitution of $234,831.92 to clients, Securities America will have to pay back $122,845.59 and SagePoint will pay back $156,903.93. They did not have to pay fines due to what FINRA called their extraordinary cooperation.
Sponsored in all 50 states, the 529 plans have different share classes with different fee structures. FINRA found that from 2015 to 2020, the three broker-dealers offered between 29 and 34 different 529 plans, with at least 20 of those plans offering sales-charge waivers on state-to-state rollovers of class-A shares or class-AR shares, which have no up-front sales charges.
But the firms’ written supervisory procedures did not alert staff to the possible availability of the waivers or the class-AR shares, and the firms failed to train them on the matter, according to the AWC letter. The companies also did not provide guidance or training to supervisors on reviewing 529 plan rollover transactions.
FINRA said the “respondents relied upon their registered representatives to determine whether sales charge waivers or Class AR shares on 529 plan rollovers were available, and to then complete the required forms to ensure that customers received those benefits.” As a result of the supervisory failures, many customers were hit with unnecessary sales charges and fees.
The attorneys at Lewitas Hyman include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. Our attorneys fully understand the regulatory scrutiny financial professionals and their firms face from the various regulators that oversee the financial services industry. If your firm is facing an investigation from a regulatory agency, please contact Lewitas Hyman at (844) 651-2643 or through our online contact form.