Morgan Stanley plans $ 1.7 million to 529 to investors for higher fees


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Morgan Stanley will pay $ 1.7 million to customers who pay higher costs on investments charged for education expenses such as college tuition.

The Financial Industry Regulatory Authority announced on Wednesday that about 2,300 customers who are saving money in 529 plans are paying the amount, including about $ 1.5 million in brokerage firm reinvestment plus interest.

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The saving is that tax-advantaged accounts can be used to pay for college, K-12 tuition and other expenses related to a beneficiary’s education.

FINRA 529, a private self-regulatory organization for the financial industry, is tightening up brokers to sell money to savers with exorbitant fees, which could cost investors thousands of dollars over the long term.

The watchdog launched a “share class initiative” last year, asking firms to self-report high fees and repay harmed customers. Those who voluntarily report violations of a rule and pay customers with damages may avoid fines.

Morgan Stanley reported the error and neither wrongly admitted nor denied it.

“We are happy to resolve the matter,” said Susan Seering, a spokesperson for the firm.

$ 1,500 in cost

FINRA stated that between 2013 and 2018, Morgan Stanley did not adequately supervise brokers’ 529-plan recommendations. Some customers were placed in Class C investment funds, which often charge higher annual fees and spend more over the long term than Class A funds, the regulator said.

According to Finara, an investment of $ 10,000 in Class C shares would be $ 1,500 less than an investment in Class A shares after nearly two decades.

“The 529 initiative aims to measure potential supervisory and suitability violations related to 529 plan share-class recommendations, and to quickly and efficiently return money to disadvantaged investors,” said Jessica Hopper, head of the regulator’s enforcement department.

Other large brokerage firms have also paid customers for higher 529 fees due to the FINRA initiative. Merrill agreed to pay $ 4 million in restitution and Raymond James, $ 8 million, Finara announced last year.

According to FILRA, b. Riley Wealth Management also agreed Wednesday to repay $ 250,000. The firm was not fined.

“BRWM voluntarily reported its findings, immediately took corrective action and proposed a plan to efficiently remove the small number of potentially affected accounts,” according to the company’s statement provided by spokesperson Joe Anne McCasker. “

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