PHOENIX- The Securities and Exchange Commission will issue a new series of educational materials geared specifically to prospective and existing retail investors in municipal securities, SEC chairman Jay Clayton told federal lawmakers Wednesday.
Clayton made the comments in prepared testimony to the House Financial Services Committee as part of a hearing on the SEC’s agenda, operations, and budget. Clayton told the panel that given the high percentage of munis held by retail investors, he has concerns about the level of understanding investors may have about the securities they own.
“Retail investors hold as much as 75% of outstanding municipal securities, both directly and indirectly through mutual funds and other funds,” Clayton said. “I have concerns, however, that some retail investors do not sufficiently understand and appreciate the unique aspects of municipal securities and the municipal securities market. Therefore, I have asked the staff to prepare a new series of educational materials – including investor bulletins – that are geared specifically to prospective and existing retail investors in municipal securities. I anticipate that the investor bulletins will provide basic, plain-language information concerning the characteristics, features and pricing of municipal bonds –including, for instance, background information on their tax status, pricing determinations and call provisions.”
Clayton also addressed the SEC’s enforcement agenda when it comes to munis. Securities lawyers have said they expect the SEC to be enforcing the fiduciary duty standard owed to municipal clients by muni advisors, as well as to continue focusing on disclosure failures.
“More generally, the commission and its staff will remain vigilant and focused on municipal securities issues,” said Clayton. “Our staff will continue to administer and vigorously enforce our rules and the statutory provisions within our jurisdiction concerning municipal securities brokers and dealers, municipal advisors, municipal issuers and investors in municipal securities. We will also continue to closely oversee and coordinate with the Municipal Securities Rulemaking Board.”
