The Municipal Securities Rulemaking Board released three new educational videos explaining what investors should expect from their brokers when buying or selling municipal securities.
“The MSRB is committed to continually providing investors with access to objective resources to help them understand how the municipal market works, said MSRB executive director Lynnette Kelly. “We hope the additions to the Investor Toolkit will provide investors with information that previously was difficult to obtain in one place.”
The first video tells investors that their brokers are required to recommend securities that are appropriate for their financial status, tax bracket and investment objectives. The brokers will look at the key features of any muni and its risks to make this determination, the MSRB says in the video.
Brokers cannot engage in excessive trading so the size and frequency of trades must be appropriate for the investor, the video says. The MSRB tells investors that they can also do their own research on the MSRB’s free EMMA system, which can found at EMMA.MSRB.org.
The second video tells investors that brokers are required to execute muni trades at fair and reasonable prices. To ensure this, brokers must look at comparable securities. The video tells investors that they, too, can conduct research over EMMA. They can look at recently traded munis that have similar features and credit quality to see what prices they are being traded at.
This kind of research “can help you negotiate a better deal with your broker,” the board tells investors.
The third video says brokers are obligated to tell muni investors about the key features and risks of any bonds they are recommending, including the sources of security and repayment for the bonds.
This information should be in the official statement for the munis and brokers can show investors where to find this document on EMMA, the MSRB says.
When bonds are bought or sold, the investor receives a confirmation that contains information about the price, amount purchased or sold, yield, and Cusip, a unique nine number/letter identifier of muni securities.
Investors can use Cusips to find out more about their munis via EMMA, the MSRB says in the video.
