SAN DIEGO, Jan. 9, 2017 /PRNewswire/ -- Gurtin Municipal Bond Management (Gurtin) applauds the upcoming regulatory changes in the Municipal Securities Rulemaking Board (MSRB) seeking to provide increased transparency into the world of previously undisclosed markups, or commissions on municipal bonds sold directly to individuals. These markups can be as high as 5%, or $2,500 on a $50,000 bond purchase or sale. The new regulation attempts to bridge the pricing information gap between municipal investors and investors in other asset classes, but falls short of providing the complete transparency that is commonplace today in other liquid markets.
"While the finance industry has seen marked improvement in transparency, the municipal bond market remains remarkably opaque," said CEO Bill Gurtin. "In the past, dealers have not been required to disclose bond markups, leaving retail investors subject to uncertainty about fees paid to dealers, or worse, under the impression that they're not paying a fee at all. Retail buyers often unknowingly forfeit a significant amount of yield to dealers, paying commissions sometimes as high as 1% to 3%. Arguably, the landscape has never been more fertile for investor education and empowerment."
The new MSRB rule, approved by the Securities and Exchange Commission on November 17 and effective no later than 18 months following the approval, requires that dealers disclose both dollar and percent markups paid by retail investors on bonds the dealer purchased from a third-party source on the same day. Additionally, a link to the MSRB's official information repository, Electronic Municipal Market Access (EMMA), will be included on the confirmation of all retail purchases.
"Gurtin is optimistic that the new rule represents a significant step toward enabling a more sophisticated and informed investing public, but we believe the new requirements still fall somewhat short of full transparency," said Co-CEO Michael Johnson. "For example, for bonds held in dealer inventories for longer than a day, it will still likely be difficult to determine with certainty the magnitude of dealer's markups. Although many institutional money managers, like Gurtin, have been buying wholesale bonds at bid price without a markup for years, this new regulation ushers in a whole new era for brokers, and it will be interesting to see how they react once it goes into effect."
About Gurtin Municipal Bond Management:
As an industry leader in municipal bond portfolio management, with $11.6 billion under management as of December 2016, Gurtin is committed to investors' complete comfort in their municipal bond investments. Gurtin strives to deliver peace of mind to investors and their advisors through first-class client service, deep analysis, and expertise, and creative strategies uncovering often overlooked value—and avoiding often concealed threats—in the municipal market. For more information, visit www.gurtin.com.
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SOURCE Gurtin Municipal Bond Management