BY LEN WEISER-VARON
FINRA has fined three broker-dealers that failed to disclose underlying ratings on insured bonds to customers. FINRA considered this a violation of the broker-dealers’ fair dealing obligations under MSRB Rule G-17, which requires the broker to disclose to a muni bond purchaser all material information that is publicly available. If ratings are material (which few would dispute), another question that arises is whether rating agency outlooks on ratings are material and need to be disclosed. Although MSRB Rule G-17 applies to brokers, not issuers, and does not dictate the means of such disclosure (e.g., whether through the delivery of an official statement or otherwise), the trend in official statements is towards disclosing ratings outlooks.