The Financial Industry Regulatory Authority (FINRA) has received approval from the Securities and Exchange Commission (SEC) for its proposal that requires its member firms to disclose on retail customer confirmations the ‘mark-up’ or ‘mark-down’ for most transactions in corporate and agency debt securities.
At the same time, the SEC also approved a similar proposal from the Municipal Securities Rulemaking Board, which harmonises the requirements across the FINRA and MSRB rulebooks and eases implementation for the securities industry.
As per the new rules, if a firm sells or buys a corporate or agency fixed-income security to or from a retail customer and on the same day buys or sells the same security as principal from another party in an equal or greater amount, the firm would have to disclose on the customer confirmation the firm’s mark-up or mark-down from the prevailing market price for the security.
The confirmation would also have to include the execution time and a reference (and hyperlink if the confirmation is electronic) to trade-price data in the security from TRACE, FINRA’s Trade Reporting and Compliance Engine.
However, the disclosure requirement will not apply to securities acquired in a fixed-price offering and sold the same day to the retail customer at the fixed price offering price, or in situations where the firm does not have an offsetting principal trade in the bonds sold to the retail customer on the same day, according to a statement.
The implementation date of the new reporting obligations will be announced later in a separate regulatory notice.
FINRA, the Financial Industry Regulatory Authority, regulates broker-dealers doing business in the US.