Pricing Disclosure in the Fixed Income Markets
Effective May 14, 2018, members are subject to new disclosure requirements, set out in Rule 2232, for corporate and agency debt securities concerning confirmation disclosure of mark-ups and mark-downs, time of execution, and a security-specific URL for webpages that contain relevant information about the traded securities. The new requirements, approved by the Securities and Exchange Commission in November 2016, will require member firms to disclose additional transaction-related information to retail customers for trades in certain fixed income securities.
• FINRA Regulatory Notice 17-24 (July 2017): FINRA Issues Guidance on the Enhanced Confirmation Disclosure Requirements in Rule 2232 for Corporate and Agency Debt Securities
• Fixed Income Confirmation Disclosure: Frequently Asked Questions
Rule 2242 (Debt Research Analysts and Debt Research Reports) has been amended to clarify the application of the rule in four respects: (1) The consent requirement for institutional debt research reports distributed to non-U.S. investors by non-U.S. affiliates of members; (2) the consent requirement for institutional debt research reports distributed to specified persons for informational purposes unrelated to investing in debt securities; (3) the scope of the institutional debt research report exemption when distributing third-party debt research reports to eligible institutional investors; and (4) the disclosure requirements for debt research analysts in public appearances.
• Securities Exchange Act Release No. 77963 (June 1, 2016), 81 FR 36628 (June 7, 2016) (File No. SR-FINRA-2016-017): Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend FINRA Rule 2242 (Debt Research Analysts and Debt Research Reports)
The SEC approved the adoption of FINRA Rule 2242 (Debt Research Analysts and Debt Research Reports) to address conflicts of interest relating to the publication and distribution of debt research reports. Rule 2242 became effective on February 22, 2016.
• FINRA Regulatory Notice 15-31 (August 2015): SEC Approves Rule to Address Conflicts of Interest Relating to the Publication and Distribution of Debt Research Reports.
Best Execution Rule
In light of the increasingly automated market for equity securities and standardized options, and recent advances in trading technology and communications in the fixed income markets, FINRA reiterates the best execution obligations that apply when firms receive, handle, route or execute customer orders in equities, options and fixed income securities. FINRA reminds firms of their obligations, as previously articulated by the SEC and FINRA, to regularly and rigorously examine execution quality likely to be obtained from the different markets trading a security.
• FINRA Regulatory Notice 15-46 (November 2015): Guidance on Best Execution Obligations in Equity, Options and Fixed Income Markets