February 26, 2018
ABLE National Resource Center Editorial Contribution
Regulatory Protections for ABLE Account Owners
By Pamela Ellis
Safety and protection are two cornerstones of security. Many of us may have loved ones that are born with, or incur, disabilities before age 26, and knowing that these individuals are secure is often at the forefront of a family’s concern.
This concern may grow into worry when dealing with the expenses associated with the care of a disabled family member. Families seeking to provide financial security for their loved ones may be able to participate in accounts established to implement the Stephen Beck, Jr., Achieving a Better Life Experience Act (ABLE) of 2014. ABLE accounts help individuals with disabilities save for qualified disability expenses while still being able to qualify for their SSI and other federal means-tested benefits.
Knowing some of the legal protections that underpin ABLE programs can provide another level of assurance for individuals with disabilities that elect to open ABLE accounts, now offered nationwide by many states. States establish ABLE programs, and those states typically enter into agreements with financial services companies to provide administration and other services to their ABLE programs. Interests in ABLE programs may be sold by affiliates of the financial services companies. The Municipal Securities Rulemaking Board (MSRB) is the self-regulatory organization that regulates the affiliates of the financial services companies and their financial professionals, that may sell interests in ABLE accounts and/or that may underwrite ABLE programs. The MSRB refers to these companies and their professionals as “dealers.”
Since interests in ABLE programs may be municipal securities under the federal securities laws and may be “municipal fund securities” under MSRB rules, dealers that facilitate transactions in ABLE accounts are subject to MSRB rules that protect investors (including potential investors) such as a set of regulations call “fair practice” rules. These fair practice rules prohibit dealers from engaging in any deceptive, dishonest or unfair practice. All dealers must comply with MSRB rules so that investors are treated fairly and appropriately.
What do MSRB rules require? First, dealers must meet professional qualification standards based on their activities and also meet continuing education requirements. These requirements ensure that dealers have a foundational level of knowledge to engage in ABLE transactions.
MSRB rules also require that any recommendation that a dealer makes be suitable for the account owner, following an effort to understand a potential account owner’s “investment profile,” which includes his or her age, financial situation and liquidity needs, tax status, investment objectives, time horizon and other factors. Before selling an ABLE account, dealers must assess and disclose material facts about the ABLE program.
MSRB rules also ensure that advertisements about ABLE programs contain only truthful information so that investors are not misled. For example, advertisements about ABLE programs cannot include any materially false or misleading information about ABLE programs in general, and any content regarding investment performance information must contain certain disclosures.
ABLE account owners who are customers of a dealer will receive annual written notification of the dealer’s registration with the MSRB and notice of the availability of the MSRB’s Customer Complaint Brochure. The brochure summarizes key principles of MSRB rules that protect municipal securities investors and includes information on how to file a complaint against a dealer with the appropriate federal regulatory authority.
What else does the MSRB do to safeguard the market for ABLE programs?
To provide transparency in the municipal securities market, the MSRB operates the Electronic Municipal Market Access (EMMA®) website. EMMA is the official repository for information on virtually all municipal securities providing free access to official disclosures, such as the program disclosure booklets for ABLE programs, and other information about the municipal securities market. Individuals seeking information on ABLE programs can visit EMMA to view an interactive map that provides information submitted to the MSRB about various ABLE programs offered by that state.
Additional informative resources are available in the MSRB’s Education Center, a multimedia library of information for anyone interested in learning about the municipal securities market. The MSRB also publishes periodic educational documents, such as this Frequently Asked Questions about ABLE Programs. Anyone interested in receiving email notifications about the availability of new educational documents can register for email updates from the MSRB.
Pamela Ellis is Associate General Counsel at the Municipal Securities Rulemaking Board.
