ICI Supports MSRB's Revised Guidance on 529 Plan Sales, May 2006

Washington, DC, May 22, 2006 - The Institute supports the revised version of guidance relating to the sale of 529 College Savings Plans recently issued by the Municipal Securities Rulemaking Board (MSRB).

Background
In May 2005, the MSRB proposed interpretive guidance regarding the obligations of municipal securities dealers selling out-of-state 529 college savings plans. ICI opposed the proposal on the grounds that it would impose on dealers selling out-of-state 529 plans burdensome requirements that do not apply to sales of any other investment product, including in-state 529 plans.

Earlier this month, the SEC published new interpretive guidance, significantly revised by the MSRB in response to the concerns expressed by the Institute and others. The original proposal required securities dealers to disclose that favorable benefits offered by the state in connection with investing in 529 plans may be available only if the customer invests in a 529 plan offered by the customer's home state. The revised guidance would require dealers selling out-of-state 529 college savings plans to disclose to the customer, at or prior to the time of the trade, that:

depending on the laws of the home state of the customer or designated beneficiary, favorable state tax treatment or other benefits offered by such home state may be available only if the customer invests in the home state's 529 plan;
state-based benefits should be one of many appropriately weighted factors to be considered in making an investment decision;
the customer should consult with his or her financial, tax, or other adviser about how such state-based benefits would apply to the customer's specific circumstances; and
the customer may wish to consult his or her home state or any other 529 college savings plan to learn more about their features.

ICI Position
The Institute supports the revised version of the MSRB's guidance because, by requiring additional disclosure, it will enhance investor protection by better alerting investors to benefits offered by their home state's plan that may not be available in connection with the purchase of an out-of-state 529 plan. It will also remind investors that they may want to consider other relevant information or consult other financial professionals prior to making an investment decision. Importantly, this enhanced protection will not result in any of the disadvantages to investors or to the market for 529 plan securities as under the MSRB's previous guidance.