Out-of-State Disclosure Obligation
Regarding 529 plans, the MSRB requires dealers selling out of state plans to disclose that customers may receive more favorable tax treatment if they purchase a 529 plan in their own home state, depending on the laws of their home state. This information must be disclosed prior to or at the time of the trade.
Specifically, the MSRB states the following three pieces of information must be included in the out-of-state disclosure. This exact language is often found in descriptions of 529 plans.
(i) depending upon the laws of the home state of the customer or designated beneficiary, favorable state tax treatment or other benefits offered by such home state for investing in 529 savings plans may be available only if the customer invests in the home state’s 529 savings plan;
(ii) any state-based benefit offered with respect to a particular 529 savings plan should be one of many appropriately weighted factors to be considered in making an investment decision; and
(iii) the customer should consult with his or her financial, tax or other adviser to learn more about how state-based benefits (including any limitations) would apply to the