The Wall Street Journal's
Mike Cherney and Kelly Nolan ask if investors are getting equal access to information, particularly municipal bonds, where a loophole gives some money managers an edge.
Powerful financial institutions can hold private meetings on the information regarding municipal bond funds because securities laws have an exception for municipalities, Cherney and Nolan write. The thought is to keep big brother out of state and local issues.
Cherney and Nolan report that around two dozen firms came to the Barclays
] New York offices to listen to Puerto Rico government officials explain why its bonds continue to be a good investment despite a downgrade to junk level.
Cherney and Nolan interviewed Malcolm Northam
, a consultant in the financial-services business and former FINRA
official, who is quoted as saying these meetings create a "two-tiered" market, adding, "That's not how markets are supposed to work."
Cherney and Nolan report that the SEC launched a new unit in 2010 that would focus on the municipal bond market and public pensions. The agency filed fraud charges against Harrisburg, Pennsylvania, with the accusation that it made misleading statements about its finances, leading the state capital to settle the charges.
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