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Proposed FINRA Rule Requires Enhanced Fee Disclosures in Fixed Income Investments

By George C. Miller, Esq.  of Shustak Reynolds & Partners, P.C. posted on Wednesday, March 9, 2016.

In late February, the Financial Industry Regulatory Authority (FINRA) approved a new rule designed to help investors understand the transaction costs associated with certain fixed-income and debt securities.  It is often difficult for investors to determine the total costs/fees associated with a fixed-income trade.  As a result, the proposed rule would require firms to disclose to investors mark-up and mark-down prices when buying/selling fixed-income securities from a retail customer and, on the same day, buying/selling the same security from another party.  The proposal is now being reviewed by the Securities and Exchange Commission.   

The rule seeks to level the playing field, as FINRA has found that some investors pay considerably more transaction fees than others for virtually identical investments.  According to FINRA, the rule will provide “meaningful and useful pricing information [which] will assist customers in monitoring costs, promote transparency into firms’ pricing practices, and help enhance investor confidence in the market.”  The disclosure requirement will not, however, apply to transactions in newly issued fixed-income securities or in situations where bonds sold to or bought from customers were held by the firm longer than one day. 

Shustak Reynolds & Partners, P.C.’s San Diego FINRA attorneys have extensive experience representing investors, registered representatives and investment advisors in a variety of securities-industry matters, including investment disputes involving churning, unauthorized trading, unsuitable investment recommendations and breach of fiduciary duty.  Contact us today for a confidential consultation. 

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