The SEC’s investor advocate has come out in support of a controversial move to disclose markups and markdowns on bond trades.
Rick Fleming, the SEC Investor Advocate, said in a comment letter Monday that dual proposals from Finra and the MSRB to require the disclosures were “long overdue.”
The similar proposals from the regulators would mandate disclosure on bond-trade confirmations of markups or markdowns from the “prevailing market price” during the day of the transaction—in both dollar amounts and as a percentage.
“Firms will be less likely to charge excessive markups when the price differential must be disclosed so clearly,” Fleming said in his letter to the SEC, which is considering the rules.
Finra and the MSRB want a one-year implementation period from the date of SEC approval.
The brokerage industry, however, wants a longer time period and more guidance on how to calculate prevailing market prices when a current price is not readily available or apparent.
Both the Securities and Financial Markets Association and the Bond Dealers of America say an automated system to calculate and report market prices will take longer than a year to build and test.
Finra and the MSRB have tweaked their disclosure proposals several times since first floating them in 2014.
Those changes, as well as Fleming’s support, could help move the rule-making along.
The Office of the Investor Advocate was established under the Dodd-Frank Act to provide an internal voice at the SEC for investor interests.