529 College Savings Plan Disclosures

MSRB Rule G-17 requires that all broker dealers and municipal securities dealers: (1) "deal fairly with all persons and not engage in any deceptive, dishonest or unfair practice and, (2) disclose to customer at the time of the trade all material facts known about the transaction, as well as material facts about the security that are reasonably accessible to the market". In this regard, the MSRB has required that additional disclosures be provided to customers and suitability analysis be performed when recommending a transaction in a 529 College Savings Plan to an out-of-state resident.

The following disclosures must be made at or prior to the time of the trade:

• depending upon the laws of the home state of the customer or designated beneficiary, favorable state tax treatment or other benefits offered by such home state for investing in 529 college savings plans may be available only if the customer invests in the home state's 529 college savings plan;
• any state-based benefit offered with respect to a particular 529 college savings plan should be one of many appropriately weighted factors to be considered in making an investment decision; and
• the customer should consult with his or her financial, tax or other adviser to learn more about how state-based benefits (including any limitations) would apply to the customer's specific circumstances and also may wish to contact his or her home state or any other 529 college savings plan to learn more about the features, benefits and limitations of that state's 529 college savings plan.
  
  The disclosure requirement may be met if the disclosure appears in the program disclosure document (official statement), if it is delivered at or prior to the time of trade and it is placed so that a customer is reasonably likely to see it. Otherwise, a separate disclosure must be provided to the customer.
  
  Disclosures provided to customers do not relieve members of their obligation to perform appropriate suitability analysis. Even though the customer of the 529 college savings plan is the person making the investment, the member should learn the essential facts of the beneficiary such as the age and the number of years until the funds will be needed. As part of that analysis, members should ensure the investment objective of the customer coincides with that of a 529 college savings plan since these plans have been designed for a specific purpose---to fund education. When selecting a particular class of investment (A, B or C share), members should take into consideration the number of years that will be required until the withdrawal of the funds since the total cost of the sales charge will affect the suitability of the investment.

Members are not required to provide information to an out-of-state customer about the state tax or other benefits available through the customer's home state. Should the member decide to provide information, it must ensure the information is correct and not misleading.