Edward Jones’ muni bad and FINRA
By Dian Vujovich
If there’s one thing wealthy Palm Beacher’s have in common it’s an affinity for tax-free municipal bond investing. Tax-free anything seems to always be rewarding. Unless, of course, you’re over charged.
Earlier this month the Edward Jones brokerage firm agreed to pay a $20+ million settlement to investors who purchased new muni-bonds issued between 2009 and 2012. In a story from Reuters dated Aug. 13 comes this: “The case is the SEC’s first against an underwriter for pricing-related fraud in the primary market for municipal securities.”
Additionally, the St. Louis-based firm was also charged with misconduct related to “supervisory failures in its review of certain secondary market municipal bond trades.”
That’s not good new for this 93-year-old firm that has pretty much thought of as having a squeaky clean reputation.
One of the first things I taught as when I entered the world of selling tax-free municipal bonds back in the early 1980s was to read from right to left. In those days, brokers were handed sheets of paper with the issues offered for sale each day. Like everything else we read, info such as the exact name of the bond offering, rating, its maturity date etc. gets read from left to right. Not so though if the commission paid is what’s of most importance. It was always listed to the very far right of the bond data. Hence the reading from right to left.
That said, new municipal bond issues already have the commission built into their offering price. It’s only after a bond hits the secondary market where the commission and right-to-left reading comes into play.
So, every investor who gets in on a new issue of a muni offering pays the same price for it. Once a bond hits the secondary market is when its price changes.
That’s probably more than you’ve ever wanted to know about muni bonds but it’s the way the game is played: right to left.
Speaking of right, the Financial Industry Regulatory Authority, FINRA, issued an Investor Alerts last month focused on the buying and selling of all types of bonds titled “Bond Liquidity—Factors to Consider and Questions to Ask” that’s worth a read. You will find it at
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