Financial (or investment) professionals that execute municipal bond transactions on behalf of individual investors have specific obligations to their customers. To protect investors, the Municipal Securities Rulemaking Board (MSRB) regulates the activities of brokers, dealers and municipal securities dealers (collectively "dealers") that buy, sell and underwrite municipal securities. MSRB rules apply to these investment services but not to investment advisers and managed accounts. To learn more about these services see Ways to Buy Municipal Bonds. The MSRB also provides free access to documents and data about municipal securities also on its Electronic Municipal Market Access (EMMA®) website.
Providing Relevant Information
An investment professional has a responsibility to their customer to provide them with relevant information about a particular transaction that generally will assist the investor in making an investment decision. Other than for the most sophisticated of investors, the investment professional must provide this information at or before the time they and the investor agree to execute a transaction.
Information About the Bond
Investment professionals must give customers a complete description of the security the investor is considering buying, including significant features such as:
- Yield
- Maturity
- Tax status
- Call features
They must also provide the investor with information that is material to assessing the potential risks of the investment, such as:
- The bond’s credit rating, if available
- How the bond’s principal and interest will be paid
- Whether the bond has credit or liquidity features that ensure it will be purchased if an investor wishes to sell it
Where to Find the Official Statement
In the sale of a newly issued bond, the investment professional must tell an investor where they can access the bond’s prospectus, called an official statement, no later than the settlement of the new issue (generally, when an investor takes ownership and has paid for an investment). Investors can request a copy of the official statement from the investment professional or, in most cases, find it on the EMMA website. Investors should read the official statement carefully and should ask their investment professional to answer questions or clarify any information contained in the official statement.
Disclosure of Material Information
Investment professionals must fully understand the bonds they are purchasing or selling on behalf of an investor and must disclose information that could have a significant impact on the customer’s decision to purchase the bond. They must obtain, analyze and disclose all material facts about the bond known to them, or that are reasonably accessible to the market through established industry sources. In addition to analyzing a bond’s official statement, investment professionals must review and issuer’s continuing disclosures, municipal bond trade data and other information.
Information Available on EMMA
The EMMA website is the official source of data and information on virtually all municipal securities, including municipal fund securities such as 529 savings plans and ABLE programs. Investors can explore EMMA to access official statements and continuing disclosure documents, credit ratings, real-time trade prices, third-party yield curves, new issue and economic calendars, interactive tools, and other information about outstanding municipal securities.
Providing Confirmations
Once a transaction has occurred, the investment professional must provide an investor with a written confirmation of the transaction details, either electronically or by mail. The transaction confirmation includes useful information about the transaction such as a unique identifier for the security called a CUSIP number, which can be used to search for information about the security on the EMMA website.
Complying with MSRB Investor Protections
The MSRB provides significant protections for investors who work with an investment professional to buy or sell municipal securities. These include rules on professional competency, fair dealing, fair pricing, suitability, best execution, and disclosure, among others. All dealers must comply with MSRB rules so that investors are treated fairly and appropriately. See the MSRB Investor Brochure to learn more about these protections and how to file a complaint against any investment professional with the appropriate federal regulatory authority.
