GAO issues Report on Municipal Securities: Overview of Market Structure, Pricing, and Regulation.
The Dodd-Frank Wall Street Reform and Consumer Protection Act required GAO to review several aspects of the municipal securities market, including the mechanisms for trading, price discovery, and price transparency. This report examines (1) municipal security trading in the secondary market and the factors that affect the prices investors receive, and (2) the Securities and Exchange Commission’s (SEC) and self-regulatory organizations’ (SRO) enforcement of rules on fair pricing and timely reporting. For this work, GAO analyzed trade data, reviewed federal regulators’ programs for enforcing trading rules, and interviewed market participants and federal regulators.
The U.S. Government Accountability Office completed a study regarding municipal securities disclosure as mandated by Section 976 of the Dodd-Frank Act. The study focused specifically on ways to identify and weigh options for improving municipal securities disclosure and its regulation. Some of the highlights are below:
- GAO analysis of trade data showed that institutional investors generally trade at more favorable prices than individual investors.
- Unlike the equities market, the relatively illiquid municipal market lacks centrally posted and continuous quotes, and other sources of pretrade price information are not centralized or publicly available to individual investors.
- SEC’s limited monitoring of FINRA and MSRB between its SRO inspections may not be sufficient to support its new risk-based inspection approach.
- Without ongoing collection and analysis of information to assess the effectiveness of SROs’ regulatory programs, SEC may be unable to identify and act on regulatory problems in a timely manner.
A one page summary of GAO’s Highlights can be found here.
Find the full report here.