Bank of America Fined for Failures in 529 Plans

The Financial Industry Regulatory Authority (FINRA) has ordered Merrill Lynch to pay a $500,000 fine for oversight failures relating to 529 plans, a college savings product. Merrill Lynch is now a unit of Bank of America.

FINRA reported that Merrill Lynch failed to have adequate supervisory procedures in place to make certain their representatives were taking into account the customers’ state income tax benefits when determining whether they should invest in a 529 plan in their state of residence or in one outside the state. Often it can be more beneficial to invest outside the state of residence, if credits or state tax deductions are offered for investors in 529 plans in the state. More than $3 billion in 529 plans were sold by Merrill between June 2002 and February 2007, according to FINRA and it contends that the only 529 plan offered and sold nationally was Maine’s NextGen College Investing Plan.

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