MSRB Files 529 Plan Database Rule

The Municipal Securities Rulemaking Board has filed a rule with the Securities and Exchange Commission to establish a database for 529 college savings plans.

Approved at the MSRB’s quarterly meeting in January, proposed rule G-45 would require primary distributors or underwriters of 529 plans to submit information including assets, contributions, distributions, fees and expenses, and performance data to the board within 60 days of the end of the reporting period.

These are college savings plans established by states under Internal Revenue Code section 529 that allow parents or other individuals to invest in state trusts to accumulate funds to pay for the expected higher education expenses of beneficiaries.

The MSRB has said the rule, if approved by the SEC, would help the board better oversee the characteristics and risks of the 529 plan market. Board chairman Jay Goldstone said the information would help the MSRB determine if it needs to implement more safeguards for investors of 529 plans.

The MSRB collects disclosure information related to 529 plans, but that data is not sufficient, according to the document the board filed with the SEC Monday morning.

“While some of the information, such as fees and costs, may be contained in plan disclosure documents submitted to EMMA, the information is not submitted in a manner that allows for analysis or comparison, since it is imbedded in static documents submitted in portable document format,” the board said.

Under the new rule, distributors and underwriters would submit the data electronically using a new form G-45.

The MSRB filing addresses a key concern that was raised by dealers.

Dealers raised concerns during the comment period regarding the confidentiality of the data, which they warned could be confusing to investors if taken out of context.

They said that some of the information could be proprietary and supported the MSRB’s proposal only under the assumption that the board would not publicly disseminate the data without further rulemaking.

The MSRB said in its filing that it will use the data internally and will make a decision later about making the information public.

“The MSRB is mindful of the concerns raised by commenters that information out of context might be confusing or misleading to investors. Consequently, it will study the data collected and consider these concerns before filing a proposal to disseminate any of the information collected,” the board said.

The rule would become effective one year after approval by the SEC.

The MSRB said dealer groups should begin taking steps to be ready to provide the required information.

Approved at the MSRB’s quarterly meeting in January, proposed rule G-45 would require primary distributors or underwriters of 529 plans to submit information including assets, contributions, distributions, fees and expenses, and performance data to the board within 60 days of the end of the reporting period, on June 30 and Dec. 31.

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