The SEC approved MSRB and FINRA proposals to require securities dealers to disclose the compensation received in transactions with retail investors. Both agencies revised their initial proposals in order to ensure a consistent approach to mark-up disclosures with respect to corporate and municipal bond transactions.
The new rules require that the dealer must disclose, on the customer confirmation, mark-ups or mark-downs from the prevailing market price for the security if: (1) a dealer sells or buys a covered fixed-income security either to or from a retail customer, and (2) then, on the same day, buys or sells the same security as principal from another party in an equal or greater amount. The confirmation also will have to include the execution time and a reference (and hyperlink if the confirmation is electronic) to trade-price data regarding the relevant security.
Commentary
This is a significant rule change affecting technology, operations, and procedures. Regulators should gather data to study the effects such increased disclosure will have on the markets.
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