Finra orders Merrill Lynch, Raymond James to pay $12 million to 529-plan customers

Regulator says firms failed to supervise share-class recommendations to plan investors

Nov 6, 2019 @ 12:09 pm

By InvestmentNews

In an agreement with the Financial Industry Regulatory Authority Inc., Merrill Lynch, Pierce, Fenner & Smith and the employee and independent broker-dealers of Raymond James have agreed to pay a total of approximately $12 million in restitution to customers who bought investments in Section 529 savings plans.

[More: 529 plan costs: Advisers, broker-dealers brace for Finra crackdown

Finra said that the customers of Merrill Lynch, Raymond James & Associates Inc. (RJA), and Raymond James Financial Services Inc. (RJFS) incurred excess fees on those investments because the firms failed to reasonably supervise share-class recommendations for the plans.

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Merrill Lynch has agreed to pay restitution of at least $4 million, RJA will pay more than $3.8 million, and RJFS will pay $4.2 million.

The decision was based on actions the firms took before Finra's 529 plan share class initiative was announced in January, which encouraged firms to voluntarily self-report potential violations relating to 529 plans.

In a release, Finra said that Merrill Lynch and the Raymond James firms had failed to ensure that their brokers considered the various fee structures when making 529 plan recommendations to customers, particularly for accounts that had young beneficiaries and long-term investment horizons.

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