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Morgan Stanley will pay $ 1.7 million to clients who have paid high costs on investments for education expenses such as college tuition.
The Financial Industry Regulatory Authority announced Wednesday that the brokerage firm is paying the amount, including nearly $ 1.5 million in compensation plus interest, to about 2,300 clients saving money in 529 plans.
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The savings are these privileged accounts of taxes that can be used to pay for college tuition, K-12 and other expenses related to the beneficiary’s education.
FINRA, the private, self-regulating private organization for the financial industry, has cracked down on brokers for selling money at excessive fees to those saving in 529 accounts, which could cost investors thousands of dollars in the long term.
Guarding Release Last year’s “Tabqa Share” initiative asks companies to self-report the high fees and pay back customers who have been affected. Those who voluntarily report violations of the rules and repay affected customers can escape the fine.
Morgan Stanley himself reported the mistake and neither admitted any wrongdoing nor denied it.
“We are happy to have this issue resolved,” said Suzanne Sering, a company spokeswoman.
$ 1,500 in costs
FINRA said that between 2013 and 2018, Morgan Stanley did not oversee the brokers’ 529 plan recommendations. Some clients have been placed in Class C mutual funds, which often carry higher annual fees and cost more in the long run than Class A funds, the regulator said.
According to FINRA, a $ 10,000 investment in Class C stocks would be worth $ 1,500 less than the same investment in Class A shares nearly two decades later.
“The purpose of the 529 initiative is to address potential oversight and suitability violations related to the plan’s 529 equity class recommendations, and to return the funds to affected investors as quickly and efficiently as possible,” said Jessica Huber, head of enforcement at the regulator.
Other large brokerage firms have also paid a hefty 529 fee to clients due to the FINRA initiative. Merrill agreed to pay $ 4 million in compensation and Raymond James $ 8 million to Vinra Advertise last year.
B. Riley Wealth Management also agreed on Wednesday to pay $ 250,000, according to Vinra. The company has not been fined.
According to a company statement provided by spokeswoman Jo Ann McCausker, “BRWM voluntarily reported its findings, promptly took corrective action and proposed a plan to efficiently address the small number of potentially affected accounts.”
