ICI Opposes MSRB Proposal Regarding Sale of Out-of-State 529 College Savings Plans, August 2005

Washington, DC, August 3, 2005 - The Institute opposes a Municipal Securities Rulemaking Board (MSRB) proposal regarding the obligations of municipal securities dealers selling out-of-state 529 college savings plans.

Background
In May, the MSRB proposed interpretive guidance regarding the point-of-sale inquiry and disclosure obligations of brokers, dealers, and municipal securities dealers under MSRB Rules G-17 and G-19 in connection with marketing of 529 plan securities.

Specifically, the MSRB has proposed to modify its existing view of a dealer's Rule G-17 disclosure obligation to now require the dealer 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 dealer also must urge the customer to consider those benefits when making his or her investment decision. To comply with this point-of-sale disclosure requirement, the dealer would be required to:

inquire whether the customer or designated beneficiary is a resident of the state of the 529 plan being marketed to the customer;
inquire whether realizing state-based benefits is an important factor in the customer's investment decision;
disclose material information about any state-based benefits offered by the home state of the customer for investing in its 529 plan and whether such state-based benefits are available in the case of an investment in an out-of-state 529 plan;
suggest that the customer consult with his or her financial, tax, or other adviser to learn more about how such home state features may apply to the customer's specific circumstances, and that the customer also may wish to contact his or her home state or any other 529 plan to learn more about any state-based benefits that might be available in conjunction with an investment in that state's 529 plan.

ICI Position
The Institute strongly supports efforts to provide potential purchasers of 529 plans with ample information to make informed investment decisions. However, in a recent comment letter, ICI states that MSRB's proposed interpretive guidance 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. The Institute expresses concern that, if the proposed guidance is adopted, either many dealers will cease selling out-of-state 529 plans or the costs to investors associated with such plans will increase.

To avoid these kinds of unintended consequences, the Institute strongly urges the MSRB to withdraw the proposed guidance.

Related Links
Additional information about the benefits of saving for education, including an online brochure that helps individuals better understand how state-sponsored 529 plans are helping millions of Americans save for higher education, is available on this website.