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Morgan Stanley will return $ 1.7 million to customers who paid high costs on investments in education expenses, such as college tuition.
The brokerage firm pays the amount, including nearly $ 1.5 million in restitution plus interest, to about 2,300 customers who save money on 529 plans, the Financial Industry Regulatory Authority announced Wednesday.
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Savings: These tax-benefit accounts can be used to pay for college tuition, K-12 tuition, and other expenses related to a beneficiary’s education.
FINRA, a private self-regulatory organization for the financial industry, has been cracking down on brokers to sell funds with excessive commissions to those who save on 529 accounts, which could cost investors thousands of dollars in the long run.
Last year, the watchdog launched a “share class initiative” that called on companies to inform themselves of high rates and pay customers who had been harmed. Those who voluntarily report a violation of the rule and pay aggrieved customers can escape a fine.
Morgan Stanley informed himself of the error and did not admit or deny the foul.
“We are pleased to have resolved this matter,” said Susan Siering, a spokeswoman for the firm.
$ 1,500 in costs
FINRA said that between 2013 and 2018, Morgan Stanley did not adequately oversee the recommendations of the runners ’529 plan. Some clients were placed in Class C investment funds, which often involve higher annual fees and cost more in the long run than Class A funds, the regulator said.
A $ 10,000 investment in Class C shares would be worth $ 1,500 less than the same investment in a Class A stock after nearly two decades, according to FINRA.
“The goal of the 529 initiative is to remedy potential oversight and suitability violations related to the recommendations of the 529 plan share class and return money to harmed investors as quickly and efficiently as possible,” said Jessica Hopper , head of the regulator’s enforcement department.
Other large brokerage firms have also returned to customers 529 high fees due to FINRA’s initiative. Merrill agreed to pay $ 4 million in restitution and Raymond James, $ 8 million, announced FINRA last year.
B. Riley Wealth Management also agreed Wednesday to pay $ 250,000, according to FINRA. The company was not fined.
“BRWM voluntarily reported its findings, immediately took corrective action and proposed a plan to efficiently remedy the small number of potentially affected accounts,” according to a company statement provided by spokeswoman Jo Anne McCusker.