According to FINRA, Royal Alliance Associates, Inc., SagePoint Financial, Inc., and Securities America, Inc. were censured for failing to establish and maintain a supervisory system reasonably designed to ensure that all eligible customers received applicable sales charge waivers or special share classes in connection with rolling over 529 plans from one state plan to another.
Royal Alliance was ordered to pay $234,831.92, plus interest, in restitution to customers. SagePoint was ordered to pay $156,903.93, plus interest, in restitution to customers. Securities America was ordered to pay $122,845.59, plus interest, in restitution to customers.
The firms' written supervisory procedures did not alert firm personnel of the potential availability of Class A sales charge waivers or Class AR shares for 529 plan rollovers, and the firms did not offer training to registered representatives on this subject. Instead, the firms 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.
The firms also failed to provide supervisors with guidance or training on how to review 529 plan rollover transactions to identify Class A sales charge waivers or Class AR shares. As a result, the firms failed to consistently apply available sales charge waivers or provide eligible customers with Class AR shares.
529 college savings plans are popular investment vehicles that provide tax advantages for education savings. When customers roll over funds from one state's 529 plan to another, they should not have to pay unnecessary sales charges if waivers are available. The failure to apply these waivers means customers paid fees they should not have been charged, reducing the amount available for education expenses.
This case highlights the importance of firms having supervisory systems that proactively identify opportunities for customers to receive sales charge waivers and reduced fees. Firms cannot simply rely on individual representatives to identify these opportunities; they must have systematic processes to ensure customers receive all benefits to which they are entitled.
