529 College Savings Plans Pending Advertisement Rule Filing and Improved Access to Plan Disclosure Materials
Pending 529 College Savings Plan Advertising Amendments
The Municipal Securities Rulemaking Board (“MSRB”) has previously filed with the Securities and Exchange Commission (“SEC”) a proposed rule change consisting of (i) amendments to Rule G-21, on advertising, and Rule G-27, on supervision, and (ii) an interpretation on general advertising disclosures, blind advertisements and annual reports relating to municipal fund securities.[1] The SEC published the proposal for comment and received one comment letter.[2] At the request of the SEC, the MSRB submitted today a reply to the comment letter.[3] In addition to providing clarification on certain issues raised in the comment letter, the MSRB proposes that required compliance by brokers, dealers and municipal securities dealers (“dealers”) with the new fee and expense disclosure requirements be delayed until July 15, 2007.[4]
New Centralized Access Facility for 529 College Savings Plan Information
The MSRB has previously noted that disclosure practices in the 529 college savings plan market should be based on six basic characteristics: comprehensiveness, understandability, comparability, universality, timeliness and accessibility.[5] The College Savings Plan Network (“CSPN”) has recently upgraded its existing website, located at www.collegesavings.org, to create a centralized web-based utility that seeks to provide a comprehensive view of the entire 529 college savings plan market. This CSPN utility provides a combination of on-site and hyperlinked resources, including summary information allowing side-by-side comparisons of many important features of different 529 college savings plans, together with direct links to more complete information provided in the program disclosure document or other relevant sources for all 529 college savings plans.
The CSPN utility joins other commercial, industry group and regulator web-based resources providing useful information on the 529 college savings plan market for both investment professionals and individual investors. Together, the CSPN website and these other resources have made considerable progress toward achieving a 529 college savings plan disclosure system that embodies the MSRB’s six basic characteristics for effectively meeting the informational needs of investors in this market. These resources provide dealers and other investment professionals seeking to provide advice to their customers on their college savings options with a significantly fuller view of the available alternatives. Customers also now have more direct access to much of the information and other resources they may need to make informed investment decisions, thereby promoting investor confidence in their own abilities to make such informed choices, whether with the advice of an investment professional or as a self-directed investor.
Finally, the MSRB believes that improved disclosures can only be effective if investment professionals and potential investors actually access such disclosures with sufficient time to make use of the information in coming to an investment decision. The MSRB urges dealers and other participants in the 529 college savings plan market to provide the investing public with easy access to, and to affirmatively encourage the use of, the CSPN utility and other similar resources. Although dealers effecting transactions in 529 college savings plans for customers are strongly encouraged to make use of these resources, dealers are reminded that they continue to be obligated to meet their affirmative disclosure obligations to customers under Rules G-17 and G-32[6] and that merely providing access to customers to such web-based resources generally will not satisfy such rule-based obligations. The MSRB will continue to monitor the 529 college savings plan market closely with respect to the adequacy of information flow to the marketplace to ensure that the MSRB’s investor protection objectives continue to be met.
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Questions regarding the proposed rule change may be directed to Ernesto A. Lanza, Senior Associate General Counsel, Jill C. Finder, Associate General Counsel, or Catherine A. Courtney, Assistant General Counsel.
[1] File No. SR-MSRB-2006-9 (as amended). See MSRB Notice 2006-32 (November 21, 2006) and MSRB Notice 2007-08 (February 12, 2007).
[2] See Securities Exchange Act Release No. 55302. The comment letter may be viewed at https://www.sec.gov/comments/sr-msrb-2006-09/msrb200609.shtml.
[3] The MSRB’s reply also will be posted by the SEC for viewing at https://www.sec.gov/comments/sr-msrb-2006-09/msrb200609.shtml.
[4] As proposed in the MSRB’s reply, the rule changes would become effective immediately upon approval by the SEC, provided that dealers would not be required to implement the new provisions of Rule G-21(e)(i)(A)(3) and (4)(a)(iii) relating to disclosure of maximum sales load and total annual operating expense ratio (as well as the related provisions of Rule G-21(e)(ii)(A), G-21 (e)(vii) and G-27(d)(ii)) for any advertisement submitted or caused to be submitted for publication, or any advertisement or correspondence otherwise distributed to the public, prior to July 15, 2007.
