Compliance November 12, 2006

NASD Orders More Fines for 529 Plan Violations

The National Association of Securities Dealers (NASD) has fined Chase Investment Services Corporation of Chicago and MetLife Securities, Inc. of New York $500,000 each for failing to establish systems and procedures to supervise the sales of 529 College Savings Plans.
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The National Association of Securities Dealers (NASD) has fined Chase Investment Services Corporation of Chicago and MetLife Securities, Inc. of New York $500,000 each for failing to establish systems and procedures to supervise the sales of 529 College Savings Plans.

According to the NASD announcement, the association found that from January 2002 through August 2004 for Chase, and from January 2002 until March 2005 for MetLife, neither firm had specific procedures governing the sale of 529 Plans, including procedures governing suitability requirements. The firms made these sales without providing specific criteria or guidance for their registered representatives to use when recommending 529 Plan purchases, NASD said.

In addition, NASD charged both firms with failing to establish criteria for supervisors to use when reviewing 529 Plans recommended by their registered representatives and failing to establish effective procedures for documenting the suitability of determinations that were made, the announcement said.

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NASD also ordered Chase to pay approximately $288,500 into about 300 accounts of customers disadvantaged by the violations, and ordered MetLife to pay approximately $376,000 into a similar number of accounts.

MetLife had announced the possibility of NASD charges last November (See MetLife Faces Possible 529 Plan Charges at http://www.plansponsor.com/pi_type10/?RECORD_ID=31431). MetLife and Chase are the second and third firms to face fines from NASD. In October 2005 NASD announced it had ordered Ameriprise Financial Services, Inc. of Minneapolis to pay a fine of $500,000 for failing to adequately supervise the firm’s sales of 529 plans (See NASD Fines Ameriprise Regarding 529 Plan Sales at http://www.plansponsor.com/pi_type10/?RECORD_ID=31244).

In March, the Municipal Securities Rulemaking Board (MSRB) filed interpretive guidance with the Securities and Exchange Commission (SEC) related to the sale of 529 plans (See MSRB Files Guidance Related to 529 Plan Sales at http://www.plansponsor.com/pi_type10/?RECORD_ID=32905).

In Practice November 12, 2006

Consider Boomer Subgroup When Targeting Communication

To help marketers more accurately target the baby boomer generation, the market research firm of Chadwick Martin Bailey (CMB), in conjunction with Arnold Worldwide, concluded a study by identifying five distinct subgroups of boomers.
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To help marketers more accurately target the baby boomer generation, the market research firm of Chadwick Martin Bailey (CMB), in conjunction with Arnold Worldwide, concluded a study by identifying five distinct subgroups of boomers.

A press release listed those five subgroups as follows:

Status Seekers – The largest segment identified, this group makes up 26% of baby boomers. The group is characterized as materialistic and feels that money is the best measure of success. They enjoy the finer things in life and are willing to pay more for brand names.

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Traditionalists – This group accounts for 23% of boomers. Traditionalists are defined by their conservative political, economic and social views. They have traditional attitudes and belief systems, are known for following the rules, and are smart consumers (interested in value, trust and variety). Forty-five percent of Traditionalists report that they will go out of the way to buy American-made products.

Blue Collar Skeptics – Eighteen percent of boomers fall into this group. The Blue Collar Skeptics are hesitant to trust big businesses and are concerned about the amount of information online. As they fall on the low end of the boomer income bracket, this group is more stressed about time and money than the rest of their generation. 68% of Blue Collar Skeptics fear they have not saved enough money for retirement.

Activists – The most politically and socially active segment, 17% of boomers are Activists. They are generally liberal and also donate a significant amount of time and money to charity. Activists are concerned about the environment, are brand-loyal, and are financially smart.

Achievers – The minority of boomers, just 16% fall into the Achiever category. This group adopts technology early and relies on it heavily. They are focused on success and wealth and are heavily involved in social activities. Twenty-four percent of Achievers claim to be the first among their friends to have new gadgets and devices.

While only one in five boomers consider themselves a “knowledgeable source of information for new technologies,” according to the release, certain portions of the boomer population are much more tech-adept than previously believed. Achievers own significantly more technology devices than their counterparts and consistently rely on technology.

Chadwick Martin Bailey surveyed 1000 Baby Boomers born between 1946 and 1964. For additional information regarding the study, email Josh Mendelsohn at jmendelsohn@cmbinfo.com.

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