FINRA recently announced its 529 Plan share class self-reporting initiative in Regulatory Notice 19-04. This initiative is consistent with FINRA’s efforts to employ remote surveillance and to have broker-dealers promptly remedy potential supervisory and suitability violations relative to share class recommendations for 529 Plans. Broker-dealers are encouraged to self-report and in turn, 19-04 suggests they may receive favorable settlement terms with FINRA. The deadline to give FINRA written notice of intention to engage in the 529 Plan self-reporting initiative is 12:00 a.m. Eastern time on April 1, 2019.
If a firm does not self-report under the Initiative and FINRA uncovers supervisory failures by that firm, any resulting disciplinary action, and sanctions imposed in connection therewith are likely to exceed those contemplated by the Initiative. In addition, even if a broker-dealer self-reports, the Initiative applies only to the member firm, and does not protect individual conduct by the firm’s registered representatives regarding 529 Plan recommendations.