The MSRB released interpretive guidance regarding MSRB Rule G-47 (Time of Trade Disclosure) stating that a municipal security that bears a market discount (i.e., trades in the secondary market below par value) is material information that must be disclosed by brokers, dealers and municipal securities dealers to their customers.
Rule G-47, subject to certain exceptions, generally requires brokers and dealers to disclose to their customers, at or prior to the time of trade, all material information known about the transaction, as well as material information about the municipal security that is reasonably accessible to the market. According to the MSRB, the existence of a market discount has certain tax consequences that may impact an investor's decision to purchase or sell an affected bond or determination of what price to pay or accept for such bond and, therefore, is material information that has to be disclosed under the Rule.
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