WASHINGTON – The Municipal Securities Rulemaking Board plans to meet here Oct. 26-27 to discuss making certain pre-trade pricing data available on its EMMA website for retail investors as well as updating syndicate offering practices.
These are two of seven areas of discussion the board outlined for the meeting in a release on Thursday and were also recently cited by new MSRB chair Colleen Woodell as important multi-year initiatives that the board will move forward with this year.
The focus on syndicate practices relates in part to an August 2015 Securities and Exchange Commission case against Edward Jones for taking newly issued bonds into its own inventory and then improperly selling them to customers at prices higher than the initial offering price. As a member of the underwriting syndicate for the bonds, the firm was supposed to offer them to customers at the initial offering price. Instead, it failed to underwrite and offer some of the bonds to investors until trading began in the secondary market.
The board also received questions about syndicate practices when it requested public comments on its rulebook a couple of years ago.
Pre-trade price transparency generally refers to bids, offers and other data that can help with pricing determinations of munis before they are traded. The board circulated some concept releases on this issue and is analyzing the comments it received.
The MSRB also plans at the meeting to discuss comments received by the SEC on the board's proposed markup disclosure and prevailing market price guidance.
The board has proposed requiring a dealer, which buys or sells munis for or from its own account to a retail customer and engages in one or more offsetting transactions on the same trading day in the same security, to disclose its markups or markdowns on the confirmation it sends the customer. The MSRB also has proposed a so-called waterfall of factors a dealer should look at to determine the prevailing market price of a muni, which would be used to calculate its compensation.
The board filed the proposal with the SEC in September. Dealers have warned the proposal is overly complex and would hurt liquidity. They are particularly concerned that they would have trouble using automated systems to comply with the waterfall concept.
The board's agenda includes a discussion of how the MSRB can help issuers improve the timeliness and completeness of their annual financial and operating disclosures.
It also includes a review of comments received on the board's draft proposal to clarify rules that generally prohibit dealers from buying or selling bonds below the minimum denominations set by issuers in bond offering documents.
The board plans to continue its analysis of uniform practice rules, with a focus on providing guidance related to managed accounts and considering possible approaches to modernizing its Rule G-26 on customer account transfers.
The board also will weigh responses to its request for comments on its strategic priorities. Its next strategic planning cycle begins in January 2017.
