FINRA is providing these Frequently Asked Questions (“FAQs”) about its 529 Plan Share Class Initiative (the “Initiative”) in response to a number of inquiries it has received from firms and trade associations. 

FAQ #1. Is FINRA asking firms to review all of their 529 plan sales and to identify unsuitable transactions?  NO …

FAQ #2. Do all firms have to conduct this assessment? Is my firm required to participate?  NO …

FAQ #3. Will a firm that chooses not to participate incur a penalty or an increased sanction should FINRA find violations in this area post-Initiative?  There is no penalty for choosing not to participate.

FAQ #4. What concerns prompted FINRA to create this Initiative?  In several ongoing exams and investigations, FINRA found deficiencies in firms’ supervision of 529 plan recommendations. For example, …

FAQ #5. What is the benefit of participating in the Initiative?  A firm that participates in the Initiative will avoid any fine that FINRA might otherwise impose in an Enforcement action …

FAQ #6. Can a firm participate in the Initiative and not face formal disciplinary action?  YES…

FAQ #7. Does FINRA take the position that certain 529 plan share classes are per se unsuitable? For example, does FINRA believe that Class C shares are inappropriate for 529 plans because 529 plans are long-term investments?  MSRB rules and guidance do not take the position that there is a per se inappropriate share class….  

FAQ #8. Is FINRA establishing a new rule about the suitability of 529 plan share classes through the Initiative?  NO …

FAQ #9. Does FINRA expect firms’ supervision of 529 plan share classes to be perfect? Can a firm determine that it has a reasonable supervisory system even if it identifies one or two isolated transactions that might be problematic?  FINRA and MSRB rules require that a firm establish and maintain a supervisory system that is reasonably designed to achieve compliance …

FAQ #10. What if a firm identifies a potential supervisory deficiency related to its sale of 529 plan shares but determines that there was no resulting customer harm; should the firm still self-report?  FINRA would encourage the firm to participate in the Initiative under those circumstances. …

FAQ #11. If firms identify concerns about the reasonableness of their 529 plan supervisory systems that are unrelated to the share class recommended, should firms self-report these concerns?  This Initiative only encompasses potential deficiencies with respect to firms’ supervision of 529 plan share class recommendations. …

FAQ #12. If a firm identifies a potential issue in its supervision but has not concluded that its overall supervision was unreasonable, can it participate in the Initiative?  Yes. FINRA encourages firms to self-report potential supervisory issues, …

FAQ #13. If FINRA examiners previously reviewed a firm’s supervision of 529 plan sales and did not recommend formal action, should the firm still conduct this self-assessment?  Firms are not required to participate in the Initiative; it is voluntary. …

FAQ #14. If a firm participates in the Initiative, must it also file a report pursuant to FINRA Rule 4530?  Not necessarily. …

FAQ #15. Should firms document their self-assessment under the Initiative?  Firms do not have to document their review. …

FAQ #16. Regulatory Notice 19-04 advises firms to provide certain information regarding their 529 plan share class supervision for the period January 2013 through June 2018 (the “disclosure period”). When calculating customer harm, should firms use that same period?  As a first step, firms choosing to participate in the Initiative need only determine whether there was a potential supervisory violation; …

FAQ #17. Why did FINRA select a 5 1/2 year time-period (from January 2013 through June 2018) for this Initiative? What should firms who improved their supervisory system during the disclosure period do with respect to this Initiative?  FINRA sought to select a period that is fair for investors who might have been affected by any supervisory failures, but not so broad that reviewing the supervisory system becomes onerous. …

FAQ #18. Can a firm receive an extension of the April 30 self-reporting deadline?  YES. …