- March 6, 2019
- Posted by: GA
- Category: FINRA
FINRA announced today, in connection with the agency’s 529 Plan Share Class Initiative (529 Initiative), that it has extended the deadline by which broker-dealers are required to self-report supervisory violations, and to provide FINRA with a plan to remediate harmed customers. In response, FINRA’s Department of Enforcement will recommend that FINRA accept a settlement that includes restitution for the impact on any affected customers and a censure, but no fine.
According to today’s announcement by FINRA:
“Participating firms must provide FINRA Enforcement notice of their self-report by April 30, 2019, and then must confirm their eligibility by submitting the additional information specified in Regulatory Notice 19-04 by May 31, 2019.”
Previously, the deadline for self-reporting had been April 1, 2019, and confirmation of its eligibility for the initiative was due by May 3, 2019. The time period covered remains the same: January 1, 2013 through June 2018, across a number of categories, including an assessment of customer impact.
Notice to Members 19-04, issued previously, outlined the types of 529 Plan supervisory weaknesses observed by FINRA and the terms of the initiative. Particularly, the focus is on 529 share class cost and benefit differences, which range from failures to train, incorporate into individual transaction assessments, and to obtain and receive the data into supervisory systems.
As 529 plans are treated as Municipal Securities, firms must look to those rules when conducting their reviews. According to FINRA, the self-reporting settlement would include Municipal Securities Rulemaking Board (MSRB) Supervision provisions (G27) and importantly – not result in a firm’s “statutory disqualification (SD).” However, if a firm does not self-report under the 529 Initiative, and FINRA later identifies supervisory failures by that firm, any resulting disciplinary actions likely will result in the recommendation of sanctions, more severe than those from self-reporting.
CFI has been working with its Clients on multi-share class matters, including 529 plans, for a number of years. A number of these topics are highlighted in an Investment News article by CFI’s Managing Director, Kamran Fotouhi, former FINRA Surveillance Director. Our Regulatory team also includes CCOs of firms that have dealt with FINRA on this subject. Moreover, CFI has built a Mutual Fund Regulatory Remediation platform to address a number of industry fund share class remediations for self-clearing, clearing and introducing firm and direct fund platforms. We also have extensive experience dealing with the SEC’s SCSD on self-reporting initiative schedules and timeframes, (SEC Select Share Class Disclosure (SCSD) – A New Enforcement Remediation” NSCP Currents March, 2018).
We understand the challenges of acquiring, validating and analyzing the data needed to perform these assessments and remediations. If you or your Counsel need assistance with this initiative, please Contact Us.