Reuters: Regulatory News: SEC redefines 'sophisticated' in municipal market

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SEC redefines 'sophisticated' in municipal market May 29th 2012, 17:20 Tue May 29, 2012 1:20pm EDT May 29 (Reuters) - Starting in July, dealers in the U.S. municipal bond market will have a simpler time identifying customers who qualify as sophisticated investors and more buyers will be considered institutional customers. The Securities and Exchange Commission on Friday approved a new definition of "sophisticated municipal market professional," which will go into effect on July 9, the Municipal Securities Rulemaking Board said on Tuesday. The new definition will help determine the suitability of transactions for some bond buyers. If a buyer is not considered sophisticated, then investor protections could apply and a broker-dealer would be accountable for making sure the buyer understood the purchase. In recent years, the board, which writes the rules enforced by the Securities and Exchange Commission, has made information about the $3.7 trillion market more available, helping inform all investors about their buying decisions. As a result, some of the guidance the MSRB issued in 2001 and 2002 that defined sophisticated investors primarily as those with access to material facts became out of date. Specifically, the new definition identifies a sophisticated investor as an institutional buyer who can independently gauge investment risks and market values of securities and can evaluate the recommendations of broker-dealers. Also on Friday, the SEC lowered the amount of assets "natural persons" must have to qualify as institutional customers to $50 million from $100 million. Link this Share this Digg this Email Reprints

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