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ARTICLE · 01 DECEMBER 2016

SEC Approves Bond Mark-Up Disclosure Rules

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FINRA and the MSRB will announce when the new rules will take effect in an upcoming regulatory notice.

United StatesCorporate/Commercial Law
Paul Eckert
Paul Eckert
Bruce Newman
Bruce Newman
Daniel J. Martin
Daniel J. Martin
Brandon Becker
Brandon Becker
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On November 17, 2016, the Securities and Exchange Commission (SEC or Commission) approved new rules requiring dealers to disclose on retail customer confirmations their mark- ups and mark-downs on most municipal and corporate bond transactions, calculated from the bond's prevailing market price (PMP).1 The controversial new requirements—first considered by the SEC more than 40 years ago2—will have major implications for dealers in the fixed income markets.

Summary

By May 2018, broker-dealers for the entire range of debt securities must design and implement new policies, procedures and systems for disclosing their mark-ups and mark-downs on offsetting retail customer transactions, calculated from the bond's PMP. To determine PMP, firms must conduct a "waterfall" analysis as set forth in existing Financial Industry Regulatory Authority (FINRA) rules and adopted by the Municipal Securities Rulemaking Board (MSRB) as part of this rulemaking.

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