The Municipal Securities Rulemaking Board on Friday proposed that dealers be more precise and diligent about proving to an issuer that sales to small customers actually meet the issuer’s definition of retail investors.
With the proposal, the agency is aiming to increase transparency on the sale of municipal securities to retail investors.
The agency has been concerned that some dealers said some sales have gone to retail customers when they actually didn’t. It has also been upset that pricing information that had been requested is sometimes not delivered or is sometimes not delivered in sufficient time to allow for communication with the requesting dealer’s “retail” customers to determine whether the investor would like to purchase the bonds.
Some city, county and state bonding operations direct their underwriters to sell a greater percentage of their issues to retail investors than others.
The proposal now goes to the Securities and Exchange Commission for approval.