According to the NASD announcement, the association found that from January 2002 through August 2004 for Chase, and from January 2002 until March 2005 for MetLife, neither firm had specific procedures governing the sale of 529 Plans, including procedures governing suitability requirements. The firms made these sales without providing specific criteria or guidance for their registered representatives to use when recommending 529 Plan purchases, NASD said.
In addition, NASD charged both firms with failing to establish criteria for supervisors to use when reviewing 529 Plans recommended by their registered representatives and failing to establish effective procedures for documenting the suitability of determinations that were made, the announcement said.
NASD also ordered Chase to pay approximately $288,500 into about 300 accounts of customers disadvantaged by the violations, and ordered MetLife to pay approximately $376,000 into a similar number of accounts.
MetLife had announced the possibility of NASD charges last November (See MetLife Faces Possible 529 Plan Charges ). MetLife and Chase are the second and third firms to face fines from NASD. In October 2005 NASD announced it had ordered Ameriprise Financial Services, Inc. of Minneapolis to pay a fine of $500,000 for failing to adequately supervise the firm’s sales of 529 plans (See NASD Fines Ameriprise Regarding 529 Plan Sales).
In March The Municipal Securities Rulemaking Board (MSRB) filed interpretive guidance with the Securities and Exchange Commission (SEC) related to the sale of 529 plans (See MSRB Files Guidance Related to 529 Plan Sales ).