Three subsidiaries of the Advisor Group, the giant broker-dealer, have been ordered to pay clients back more than half a million dollars by the Financial Industry Regulatory Authority, after the agency said the firms failed to waive charges for 529 plan rollovers as required by the plans.

Finra this week ordered Advisor Group subsidiary Royal Alliance to make restitution of $234,831.92 to clients, while ordering Securities America to pay back $122,845.59 and ordering SagePoint to pay back $156,903.93. The firms also received a censure.

The action is related to the popular college savings plans known as 529 plans, which offer tax advantages for people saving to pay for educational expenses. These plans are sponsored in all 50 states, which offer them directly or through broker-dealers, and come with different share classes that have different fee structures. Class A shares charge higher front-end charges but lower ongoing annual fees, Finra noted, while Class C shares have no front-end fee, but higher annual fees.

“Some 529 plan product sponsors,” Finra said, “waive sales charge for investors who roll their current 529 plan from one state’s 529 plan into another state’s 529 plan, either by waiving the sales charges on Class A shares or by offering a special share class, Class AR, which is meant specifically for 529 plan state-to-state rollovers and has no up-front sales charge.”

From 2015 to 2020, Finra said, the three Advisor Group subsidiaries each offered between 29 and 34 different 529 plans, and at least 20 of those plans were supposed to waive sales charges when the 529 plans’ Class A shares were rolled over from state to state.

Finra said of the Advisor Group firms that, the “respondents’ written supervisory procedures did not alert firm personnel of the potential availability of Class A sales charge waivers or Class AR shares for 529 plan rollovers and the firms did not offer training to registered representatives on this subject. Instead, [the] respondents relied upon their registered representatives to determine whether sales charge waivers or Class AR shares on 529 plan rollovers were available, and to then complete the required forms to ensure that customers received those benefits. [The] respondents also failed to provide supervisors with guidance or training on how to review 529 plan rollover transactions to identify Class A sales charge waivers or Class AR shares.”

As a result, between September 2015 and September 2020, Securities America failed to apply sales charge waivers in 38% of the 529 rollover transactions in 250 accounts totaling $4 million in purchases. As a result, customers got dinged with $120,000 in unnecessary sales charges and fees.

Royal Alliance failed to waive the charges in 41% of the rollovers, and thus racked up $235,000 in unnecessary sales charges for 500 accounts in purchases totaling some $7 million, Finra said. SagePoint, meanwhile, racked up $160,000 in unnecessary charges after failing to waive them in 56% of its rollovers, an oversight that affected 260 accounts and $5.3 million in rollover purchases.

According to the website Saving For College, students might want to roll over their 529 plans if they find better tax advantages in another state or because a plan is underperforming. The site says that plan owners are entitled to one tax-free rollover in a 12-month period.

Spokespeople for the Advisor Group declined comment on the Finra action. The firm ranked third in Financial Advisor magazine’s “Broker-Dealer Review and Ranking” in 2022.