• FINRA Presents Bond Disclosure Revisions for Public Comment
  • April 9, 2015 | Authors: Terrance A. Bostic; Jeffrey J. Chomko; Samuel E. Cohen; Andrew W. Davitt; Denis C. Dice
  • Law Firms: Marshall Dennehey Warner Coleman & Goggin, P.C. - Tampa Office ; Marshall Dennehey Warner Coleman & Goggin, P.C. - Philadelphia Office
  • In an effort to increase transparency about potentially hidden markups in bond transactions, FINRA proposed potential rule revisions for public comment. The proposed rule changes, a companion to an almost identical proposal put forth by the MSRB covering municipal bonds, require bond dealers in retail-sized fixed income sales to disclose to customers the price of same-day principal trades in the same security, as well as the difference between that reference price and the customer’s bond purchase price.

    Proposed amid growing concerns over non-disclosed markups in riskless principal transactions, the potential rule revisions are open to public comment until January 20, 2015. Riskless principal transactions are trades in securities that involve two identical orders, with one of them being dependent upon receipt, execution or completion of the other.

    FINRA has stated that they are seeking public comments on the likely economic implications of the proposed rule changes as well as input on alternative regulatory approaches to the governance of riskless principal transactions. Included among the potential regulatory approaches are potential mark-up disclosure requirements that would be included on a customer’s trade confirmations.