Regulators are getting together to smooth the operations of the 529 College Savings Plan marketplace. The NASD
and the Municipal Securities Rulemaking Board (MSRB)
on Wednesday vowed to work to ensure that their respective rules governing mutual fund sales and 529 college savings plans are in sync.
While the NASD oversees the operations of broker-dealer firms distributing the plans. The MSRB, on the other hand, develops rules governing broker-dealers and dealer banks that underwrite, trade and sell municipal securities.
Harmonizing the 529 plan rules would give rise to "the dual benefits of protecting investors in both markets under similar standards and subjecting municipal securities dealers to similar regulations irrespective of whether the product being sold is a 529 Plan interest or shares in mutual fund," officials of the two organizations said in joint statement.
529 plans typically use registered mutual funds as their main investment vehicle, but because they are products of state governments, they are considered municipal securities under federal securities laws.
Sales of these plans, however, raise the same kinds of broker-dealer practice issues that crop up in the sale of mutual funds, and so the harmonization of rules "would further protect the investing public," officials said.
In the joint statement, officials said MSRB will adopt rules and regulations on 529 plans that are equivalent to NASD rules and interpretations concerning mutual fund sales practices adopted in the future.
In the event that the MSRB finds that a NASD rule is inappropriate, "the MSRB will adopt any permissible and appropriate portions of the rule and adopt, when possible, alternative rules and interpretations providing substantially equivalent investor protections," officials said.
MSRB and NASD officials have also agreed to provide each other with an opportunity to comment on relevant proposed regulations and interpretations on 529 plans and mutual funds prior to their publication or filing with the Securities and Exchange Commission.
The two organizations will also coordinate any response to a request for information or rulemaking by the SEC concerning 529 plans.
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