WASHINGTON - The Securities and Exchange Commission has approved a rule change to help the Municipal Securities Rulemaking Board analyze municipal fund securities and detect "potential investor harm."
The SEC said it filed an approval order Wednesday granting the MSRB permission to amend its Rule G-45, on reporting of information on municipal fund securities, so as to create more uniformity in how dealers report information about 529 college savings plans and Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (ABLE) programs.
The changes will be effective June 30, 2019.
Both 529 plans and ABLE programs, the latter of which creates tax-advantaged savings accounts for individuals with disabilities and their families, are municipal fund securities. The MSRB regulates dealers that underwrite or sell interests in 529 plans and ABLE accounts. The MSRB first began collecting data about 529 plans in 2015 and added data about ABLE programs in 2018.
The board
The idea, the MSRB has said, is to standardize reporting of information so that the MSRB can do a more “apples to apples” comparison in surveying municipal fund securities. For example, Form G-45 requires that underwriters report the amount of the program management fee assessed by the plan. This fee is usually separately identifiable, but some plans just include it in the total fund operating expenses assessed by the underlying mutual fund in which the investment option exists.
Under the new rule, the underwriter will have to report the program management fee as an annual percentage of assets no matter how the fee is assessed.
In addition, sometimes an investment option offered in a 529 plan may be closed to new investors but allow current account owners to continue to invest in it even though it is “closed.” A 529 plan may also close an investment option completely. In either case, the investment option data submitted for that investment option on Form G-45 doesn't differentiate between the two. To clarify that, the Form will now have a check box indicating whether an investment option was closed to new investors or closed completely.
The new rule will also not include annualized three-year performance information because the MSRB decided and the SEC agreed that the amended Form G-45 will provide the MSRB with the data it needs to accurately assess municipal fund securities.
“The MSRB can use the data elements collected on Form G-45 to monitor these municipal fund securities and detect potential investor harm,” the SEC said in its order. “The Commission believes that the proposed rule change would improve the MSRB’s ability to analyze the market for 529 savings plans and ABLE programs as well as improve the MSRB’s ability to evaluate trends and differences among 529 savings plans and ABLE programs.”
The potential compliance burdens are likely outweighed by the benefits, the SEC concluded.
