FINRA Mandates More Due Diligence Before Recommending Munis
FINRA has issued a Regulatory Notice that mandates significant due diligence before recommending municipal securities. FINRA explains that the due diligence obligations apply to secondary market transactions as much as primary offerings. A firm must disclose information available through the MSRB’s EMMA system as well as “material available through other public sources.” A firm cannot simply refer a client to the EMMA system and may not rely on credit ratings. FINRA also requires that firms understand and disclose a municipal security’s “non-standard features.” FINRA has provided a list of questions to consider as well as a “Checklist for Customer Disclosure.”
OUR TAKE: Although FINRA would argue that this Regulatory Notice is simply a reminder of currently-existing obligations, it appears to increase a firm’s obligations with respect to understanding a security’s features and determining suitability.
http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p122112.pdf
http://www.finra.org/Industry/Issues/BooksRecords/P122119
OUR TAKE: Although FINRA would argue that this Regulatory Notice is simply a reminder of currently-existing obligations, it appears to increase a firm’s obligations with respect to understanding a security’s features and determining suitability.
http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p122112.pdf
http://www.finra.org/Industry/Issues/BooksRecords/P122119
Posted by Todd Cipperman at 9/21/2010 5:38 AM 
Categories: Distribution and Broker-Dealers
Tags: municipal securities due diligence recommendations suitability
Categories: Distribution and Broker-Dealers
Tags: municipal securities due diligence recommendations suitability
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