A self-regulatory group is warning member firms to tell college savings clients about the possible tax advantages of using home-state savings programs.

The National Association of Securities Dealers, Washington, has issued a $500,000 fine to a securities unit of MetLife Inc., New York, in connection with allegations that MetLife failed to establish adequate systems and procedures for supervising the sale of 529 college savings plans.

The NASD also issued a $500,000 fine to an investment services unit of JP Morgan Chase & Company, New York, in connection with similar allegations.

MetLife must pay $376,000 into a compensation fund for about 300 customer accounts, and Chase must pay about $288,500 into about 300 of its accounts, NASD officials say.

The District of Columbia and all states but Wyoming sponsor 529 college savings plans. Taxpayers can get federal tax breaks by contributing to 529 plans sponsored by any state, but most states limit use of breaks on state income taxes to residents who use home-state 529 plans.

Chase and MetLife have consented to the entry of the NASD’s findings, but neither has admitted nor denied the NASD’s findings, officials say.

The NASD says MetLife failed to apply specific 529 plan suitability requirements from January 2002 to March 2005, or to document the suitability of the plans recommended during that period.

Similarly, Chase failed to give its reps specific suitability criteria or document suitability of recommendations from January 2002 to August 2004, NASD officials say.

MetLife sold about $150 million in 529 plans and Chase sold about $134 million in 529 plans during the periods under review, officials say.

MetLife says in a statement that the company already has addressed the concerns raised by the NASD in the settlement announcement.

“MetLife Securities enhanced its procedures regarding the sale of 529 plans in March 2005, and we are confident that clients’ best interests in planning for college education costs are a top priority,” MetLife says. “We are glad to have resolved this matter with the NASD.”

JPMorgan representatives were not immediately available to comment on its settlement.