Morgan Stanley repays $1.7 million to college savers for high-cost investments

Morgan Stanley will repay $1.7 million to customers who paid high costs on investments earmarked for education expenses like college tuition.

The brokerage firm is paying the sum, including nearly $1.5 million in restitution plus interest, to about 2,300 customers who are saving money in 529 plans, the Financial Industry Regulatory Authority announced Wednesday.

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Savings is these tax-advantaged accounts can be used to pay for college, K-12 tuition and other expenses related to a beneficiary’s education.

FINRA, a private self-regulatory organization for the financial industry, has been cracking down on brokers for selling funds with excessive fees to those saving in 529 accounts, which can cost investors thousands of dollars over the long term.

The watchdog launched a “share class initiative” last year asking firms to self-report high fees and repay customers who’d been harmed. Those who voluntarily report a rule violation and repay harmed customers can escape a fine.

Morgan Stanley self-reported the error and neither admitted nor denied wrongdoing.

“We are pleased to have resolved this matter,” said Susan Siering, a spokeswoman for the firm.

Other large brokerage firms also have repaid customers for high 529 fees due to FINRA’s initiative. Merrill agreed to pay $4 million in restitution and Raymond James, $8 million, FINRA announced last year.

B. Riley Wealth Management also agreed Wednesday to repay $250,000, according to FINRA. The firm wasn’t fined.

“BRWM voluntarily self-reported its findings, immediately took corrective actions and proposed a plan to efficiently remediate the small number of potentially affected accounts,” according to a company statement provided by spokeswoman Jo Anne McCusker.