NASD Probes Out-of-State 529 Plan Sales:Six Firms Suspected of Misleading Investors on Tax Benefits
The tax advantages enjoyed by people who invest in their own states' 529 college-savings plans are substantial, but some firms may not be emphasizing that point, prompting an investigation by the National Association of Securities Dealers, The Wall Street Journal reports.
According to the Journal, the NASD is looking into whether six large securities firms sold out-of-state 529 plans to investors without providing an explanation as to the tax benefits of staying instate for the plans.
While not specifically naming the firms, NASD Vice Chairman Mary Schapiro told the Journal that more than 90% of the 529 money that came into those six companies was from out-of-state investors.
"We have to look at it very closely," Schapiro told the Journal. "[Investors] potentially lost one of the great benefits of buying a 529 plan: state tax deductibility."
The news comes as the fees associated with 529 plans are being investigated in Washington. Securities and Exchange Commission chairman William Donaldson has said a new SEC task force will look into both fees and the transparence of disclosure in 529s.
As of last month, 529 college plans and the federal and state tax advantages they bring had nationwide assets of $37 billion, according to Morningstar. The 529 plan was introduced in 1997.