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Home / Business / Morgan Stanley repays $1.7 million in high expenses to 529 plan investors

Morgan Stanley repays $1.7 million in high expenses to 529 plan investors



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Morgan Stanley (Morgan Stanley) will repay $1.7 million to customers who have paid a high price for investments dedicated to university tuition and other educational expenditures.

The Financial Industry Regulatory Authority announced on Wednesday that the brokerage firm will pay the money, including nearly $1

.5 million in compensation and interest, to approximately 2,300 customers who have saved money in 529 plans.

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Savings are these tax-friendly accounts that can be used to pay for college, K-12 tuition, and other expenses related to the education of the beneficiary.

FINRA, a private self-regulatory organization targeting the financial industry, has been cracking down on brokers because they sell excess fees to savers with 529 accounts, which could cost investors thousands of dollars in the long run.

The regulator launched a “stock plan” last year, requiring companies to self-report high expenses and repay damaged customers. Those who voluntarily report violations and compensate victimized customers can escape fines.

Morgan Stanley self-reported the error and neither admits nor denies wrongdoing.

Susan Siering, a spokesperson for the company, said: “We are very happy to solve this problem.”

$1,500 fee

FINRA stated that between 2013 and 2018, Morgan Stanley did not adequately monitor the broker’s 529 plan recommendations. Regulators say that some customers are placed in C-type investment funds, which usually charge higher annual fees, and in the long run, their costs are higher than those of A-type funds.

According to FINRA, after nearly 20 years, an investment of US$10,000 in Class C stocks will be US$1,500 less than the same investment in Class A stocks.

Jessica Hopper, head of the regulatory agency’s enforcement department, said: “The purpose of the 529 initiative is to correct potential regulatory and applicability violations related to the 529 plan’s share class recommendations and return money to the injured investors as soon as possible.”

As a result of FINRA’s initiative, other large brokerage companies also repaid customers 529 high fees. FINRA announced last year that Merrill Lynch agreed to pay US$4 million in compensation and Raymond James would pay US$8 million.

According to FINRA, B. Reilly Wealth Management also agreed on Wednesday to repay $250,000. The company was not fined.

A company statement provided by spokesperson Jo Anne McCusker said: “BRWM voluntarily self-reported its findings, took immediate corrective measures, and proposed a plan to effectively remedy the few accounts that may be affected.”


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