According to FINRA, LPL Financial LLC was censured and ordered to pay $982,354 in restitution to customers for failing to establish and maintain a supervisory system reasonably designed to supervise registered representatives' recommendations to customers to rollover 529 savings plan investments from one state plan to another. No fine was imposed in recognition of the firm's extraordinary cooperation through voluntary participation in FINRA's 529 Plan Share Class Initiative.

The firm was found in violation of supervisory obligations related to 529 plan rollovers. LPL sold 529 plans that offered sales charge waivers or Class AR shares when a customer held Class A shares in one state-sponsored 529 plan but decided to roll over the shares into another state's 529 plan. However, the firm did not establish and maintain a system to determine that the waivers were applied to each eligible transaction or that eligible customers received Class AR shares.

Specifically, LPL had no policies or procedures to identify those 529 plans that offered rollover sales charge waivers or Class AR shares. The firm failed to adequately notify and train its representatives regarding the availability of sales charge waivers and Class AR shares. Likewise, the firm failed to adopt any controls to detect instances where it did not provide customers with available waivers or Class AR shares in connection with eligible rollovers. As a result, LPL failed to apply available sales charge waivers or recommend Class AR shares to thousands of transactions with an aggregate principal value of approximately $28 million, which resulted in the firm overcharging customers $982,354 in front-end sales charges.

When families move to a different state or find a 529 plan with better investment options or lower fees, they may roll over their existing 529 plan to a new plan. Many 529 plans offer sales charge waivers or special share classes with lower fees for customers rolling over from another 529 plan, recognizing that the customer is transferring an existing investment rather than making a new one. These waivers can save customers significant money. This case demonstrates that firms must have systems to identify available discounts and ensure customers receive them. Investors considering 529 plan rollovers should ask whether sales charge waivers are available.