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Maine.gov> PFR Home > Securities Home > All Press Releases > Maine Securities Administrator Finalizes $19.4 Million Agreement with Merrill Lynch Regarding Maines NextGen College Investing Plan

 

May 25, 2018

FOR IMMEDIATE RELEASE

 

Contact: Judith M. Shaw, Securities Administrator

 

Maine Securities Administrator Finalizes $19.4 Million Agreement with Merrill Lynch Regarding Maines NextGen College Investing Plan

 

Maine Securities Administrator Finalizes $19.4 Million Agreement with Merrill Lynch Regarding Maines NextGen College Investing Plan

GARDINER Securities Administrator Judith Shaw today announced that the terms of a final Consent Order with Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) have been reached in connection with an investigation of Merrill Lynchs management of Maines NextGen 529 College Investing Plan.

The investigation conducted by the Office of Securities focused on the appropriateness of sales of Class C units within the NextGen Client Select Series for accounts with younger beneficiaries which can result in higher fees over a longer holding period. According to the Offices Consent Order, Merrill Lynch failed to appropriately supervise its agents to ensure the beneficiaries age, investment time horizon and the relative expense of Class A and Class C units were considered when its agents recommended NextGen investments. It also concludes that the placement of certain high-value accounts into the Class C units was unsuitable. The Order does not involve NextGen grants issued by the Harold Alfond College Challenge program.

Under the terms of the Order, Merrill Lynch will pay restitution of nearly $19 million to approximately 50,000 accounts across the United States. This includes approximately $124,000 in restitution to Maine residents. In lieu of a civil penalty, Merrill Lynch has also agreed to pay $500,000 to the Maine Securities Investor Education and Training Fund administered by the Office of Securities.

NextGen provides an opportunity for parents and grandparents across the country to save for a childs educational expenses. For years, Merrill Lynch did not have the supervisory systems in place to ensure that these savings were being placed into the most appropriate and cost effective accounts, said Administrator Shaw. Money set aside for educational expenses should be used to pay for education, not unnecessary fees.

The Offices investigation was conducted by Senior Investigator Jacqueline Drouin. The Administrator also recognized the cooperation and assistance of the Financial Industry Regulatory Authority (FINRA). FINRA is a self-regulatory organization that regulates brokerage firms doing business with the public in the United States.

Administrator Shaw urged anyone who has questions about investing to contact the Office of Securities. Information about advisers, salespersons and investing is available at www.investors.maine.gov, by calling 1-877-624-8551 or writing to the Maine Office of Securities, 121 SHS, Augusta, Maine 04333-0121.

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The Office of Securities is an agency within Maines Department of Professional and Financial Regulation (www.maine.gov/pfr)

Last Updated: April 5, 2019 12:58 PM