The Securities and Exchange Commission has issued an Investor Bulletin to help purchasers of municipal bonds better assess the bonds’ credit risks.
The bulletin provides several factors for investors to consider, including the type of bond, the purpose and nature of the financing, the overall financial condition of the issuer, and the sources of funds to pay both principal and interest.
The bulletin also urges investors to undertake their own independent review of municipal bonds’ credit risk and not rely solely on a credit rating or a short-hand label such as “general obligation” or “revenue” bond when deciding whether to purchase a municipal bond.
“Investors should gather as much relevant information as they can before spending their hard-earned dollars on any investment,” said SEC chair Elisse Walter in a statement. “While I will continue to push for enhanced and more timely disclosure by those who issue municipal securities, investors should continue to learn all they can before purchasing them.”
The bulletin also provides a list of additional resources where investors can find more information on municipal bonds. The bulletin was prepared by an intra-agency group including the Office of Investor Education and Advocacy, Division of Enforcement, Office of Credit Ratings, Office of Municipal Securities, Division of Trading and Markets, and the Division of Corporation Finance.
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