In response to a request by the SEC Office of the Investor Advocate, the MSRB identified products and practices in the municipal securities market that may have an adverse effect on retail investors. The MSRB identified four areas of particular concern: (1) disclosure practices; (2) price fairness and transparency; (3) types of ownership; and (4) senior investor protection.

  • Disclosure Practices. The MSRB encouraged issuers to: (i) incorporate best practices and policies to shorten the time it takes to communicate valuable information to investors; (ii) implement disclosure practices to ensure that all investors and stakeholders have equal access to the same information in a timely manner; and (iii) clearly detail the priority of creditor payments in issuer disclosure documents, including the presence of any statutory liens or other contractual obligations.
  • Price Fairness and Transparency. The MSRB filed a proposal with the SEC which would require dealers to disclose to retail investors any mark-ups or mark-downs from the prevailing market price for a security on the retail customer confirmation in certain principal transactions. The MSRB also filed associated regulatory guidance with the SEC on how dealers determine the prevailing market price of bonds from which their mark-ups and mark-downs are calculated. In addition, the MSRB indicated that it will: (i) conduct a holistic review of its rules regarding primary offering practices to enhance existing protections under MSRB rules; and (ii) continue to provide new resources and tools on the Electronic Municipal Market Access ("EMMA") system to support pre-trade price transparency in the municipal securities market.
  • Types of Ownership. The MSRB warned of the potential for risk in a rising interest rate environment given changes in the ownership profile of municipal securities. These changes include: (i) a significant drop in the number of dealers; (ii) shrinking dealer inventories of municipal securities; and (iii) increasing municipal bond mutual fund balances. These factors could lead to reduced liquidity in the mutual fund market, and this type of market dislocation could have a significant impact on mutual fund net asset values and the overall value of investors' municipal bond positions.
  • Senior Investor Protection. The MSRB expressed concern for the protection of seniors and vulnerable investors given the rising average age of municipal bond investors. 

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