The National Association of Securities Dealers has imposed a $500,000 fine on Ameriprise Financial Services Inc. in connection with what the NASD says were problems with supervision of advisors who were selling 529 college savings plans.[@@]
Ameriprise, Minneapolis, is neither admitting nor denying the allegations, but it has agreed to pay about $750,000 to compensate holders of about 500 accounts affected by the alleged supervision problems.
“We are pleased to have resolved this matter,” says Ameriprise spokesman David Kanihan. Kanihan declined to talk further about the enforcement action.
The NASD, Washington, says the Ameriprise fine is the first fruit of a 529 plan sales “fact-finding sweep” that started in 2003.
Sales of 529 plans are regulated by the Municipal Securities Rulemaking Board, but the NASD enforces the board’s rules.
The NASD, which appears to be gearing up to impose fines on other 529 plan sellers, says Ameriprise did a poor job of making sure that consumers understood the potential state income tax benefits of offering 529 plans in their home states.
Each 529 plan program has a state sponsor. Section 529 of the Internal Revenue Code exempts all qualified plan contributions and distributions from federal income taxes, but it lets states decide whether to offer breaks on state income taxes to purchasers of their own 529 plans or other states’ 529 plans.
Between May 2001 and October 2003, Ameriprise gave sales reps little guidance about the need to incorporate state income tax concerns into assessments of 529 plan product suitability for specific customers, and, between October 2003 and December 2004, the company gave reps no practical advice about how to incorporate state income tax concerns into the suitability assessment process, the NASD says.
The NASD says Ameriprise sold 529 plans with a total value of $1.1 billion to 138,000 customers during the period under review.
Amerirprise generated $55 million in 529 plan sales by selling the plans to customers living outside Wisconsin in states that offered generous tax breaks for purchasers of home state 529 plans, the NASD says.
Ameriprise will be paying the $750,000 in compensation to customers from outside Wisconsin who lost tax benefits because they bought the Wisconsin 529 plans, the NASD says.