What is CMFI? We are a shareholder advocacy organization dedicated to promoting the interests, needs, and concerns of individual mutual fund investors. Learn more
On March 20, 2014, the Coalition of Mutual Fund Investors (CMFI) filed a comment letter with the Securities and Exchange Commission (SEC), in response to a new rule change affecting Section 529 college savings plans.
Click here to review this CMFI comment letter: http://www.investorscoalition.com/sites/default/files/CMFI%20Comment%20Letter%20re%20MSRB%20Rule%20G-45%203-20-2014.pdf
Last year, the Municipal Securities Rulemaking Board (MSRB) proposed new Rule G-45, to require the underwriters of Section 529 plans to report certain information to the MSRB regarding these plans.
Several commenters to this rule proposal noted that compliance would be difficult for non-transparent omnibus accounts, where the underwriter may not have access to account information at the underlying investor level.
The MSRB responded by clarifying that underwriters would be required to submit information they possess or have the legal right to obtain, even if they have voluntarily relinquished that right. The MSRB bases its position on the fact that an industry information-sharing utility operated by the National Securities Clearing Corporation (NSCC) already provides daily transparency of underlying investor account information to Section 529 plans. This industry utility was created to ensure that state sponsors and program managers of 529 plans comply with Internal Revenue Service (IRS) rules regarding aggregation of accounts.
CMFI’s comment letter points out other tax compliance issues that the IRS is focused on, as further justification to insist on daily transparency of investor-level information within omnibus accounts.
Section 529 plans are yet another reason why the SEC should amend its Rule 22c-2, to require omnibus accounts to provide daily transparency at the individual investor level, for the protection of mutual fund shareholders and to ensure compliance with Federal securities and tax laws.