The NASD slapped both Chase Investment Corp. and MetLife Securities with a $500,000 fine for failing to establish systems and procedures to supervise the sales of 529 college saving plans.
Also, the firms must compensate customers disadvantaged by those supervisory failures. Chase will pay an additional $288,500 and MetLife $376,000 into roughly 300 customer accounts.
The NASD found neither firm had procedures in place to oversee the sale of 529 plans, including suitability requirements, from January 2002 through August 2004 for Chase and January 2002 through March 2005 for MetLife. During these time periods, Chase's 529 plan sales exceeded $134 million, while MetLife's were over $150 million.
These are the second and third cases to result from the NASD examining firms on the sale of 529s. In October 2005, Ameriprise Financial Services was fined $500,000 and ordered to pay approximately $750,000 to customers.
"Firms must take steps to ensure that investors are aware of the critical features of the many different 529 plans that are being offered today, so investors are better able to choose a plan that's right for them," said James S. Shorris, EVP and head of enforcement at the NASD. "Brokers must consider all relevant factorsincluding possible state tax benefits, investment choices, expenses and whether a 529 plan is a suitable investment for a customer."
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