RCA - January 1996 - Ask The Analyst - Fixed Income Matters

Q. Are members required to disclose the rating of a corporate or municipal bond in sales communications?

A. No. It is not a requirement to disclose ratings. However, a bond rating or the fact that it is unrated is one way to disclose the risk level associated with the investment.

Q. When in the sales process should CMO educational material be offered?

A. The offer of educational, material can be made in advertising, sales literature, correspondence, or verbally, but must occur before, or at the time of, any offer or sale of the security. To assure that customers are adequately informed about basic investment features and risks associated with CMOs; the Guidelines Regarding Communications With The Public About Collateralized Mortgage Obligations require members to offer this educational material. (For more information see Notice to Members 93-85, December 1993.)