More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
The Financial Industry Regulatory Authority announced Monday that its Trade Reporting and Compliance Engine (TRACE) will now provide increased transparency in mortgage-backed securities issued by Fannie Mae, Freddie Mac, Ginnie Mae and in securities backed by loans guaranteed by the Small Business Administration.
FINRA says it will begin to disseminate information through TRACE for so-called specified pool transactions in agency pass-through mortgage-backed securities and SBA-backed securities, representing approximately 3,500 trades totaling $18 billion in par value, on an average daily basis.
FINRA Vice President Ola Persson said in a statement that “With today's announcement, TRACE has brought historic transparency to the mortgage-backed market,” adding that FINRA will soon file with the Securities and Exchange Commission to bring transparency to asset-backed securities — including those backed by auto loans, credit card receivables and student loans.
FINRA announced at its July 11 board meeting that it will soon file proposed rule amendments with the SEC to disseminate transactions in the above-mentioned asset-backed securities.
TRACE will disseminate transaction information such as the time of the trade, price and volume. For security identification, in lieu of the CUSIP, FINRA will provide the key characteristics of the security. Transactions must be reported to TRACE within two hours of execution, and are disseminated as soon as received (the reporting timeframe will be reduced to one hour after six months).
On Nov. 12, FINRA began disseminating transaction information for agency pass-through mortgage-backed securities traded "to-be-announced" (TBA). “Together, the market for agency pass-through mortgage-backed securities traded either TBA or specified and SBA-backed securities represent over 90% of the par value traded in all asset- and mortgage-backed securities,” FINRA says.
Market professionals are able to access the information via major market data vendors. Retail investors will have free access to this data through FINRA’s Market Data Center starting July 29. In addition to making transaction information available, FINRA has developed a comprehensive online learning center — Smart Bond Investing — where retail investors can become familiar with the full range of bond types, features and considerations when investing in bonds.
Check out FINRA Tells BDs to Stop Pitching ‘Free’ IRAs on ThinkAdvisor.