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What Constitutes An Excessive Markup Or Markdown?

There are different rules and regulations governing markups and markdowns on fixed income securities or bonds.

For transactions involving municipal bonds, there is the Municipal Securities Rulemaking Board Rule G-30, which prohibits unfair and unreasonable markups. The markup or markdown on a bond that we're talking about is the difference between the price charged to the customer and the prevailing market price. The difficulty is often determining what the prevailing "market price" is.

Although there is no question that the broker/dealer is entitled to add a markup to the price it pays for the securities, the markup must be fair and reasonable. Whether that markup is fair and reasonable is determined on a case-by-case basis. A markup may be "excessive" when it bears no reasonable relation to the prevailing market price.

We Have Extensive Experience With Securities Cases

If you think you were charged excessive markups or markdowns, contact our experienced lawyers to learn more about your rights and whether the broker/dealer may be held liable. The attorneys of Mihalek Law have more than 50 years of combined experience handling securities cases and arbitration matters. We protect the rights of investors in Lexington, Kentucky, and throughout the country, recovering the millions of dollars from brokers and the firms that employ them.

Excessive Markups And Markdowns On Bonds

We are seeing widespread abuse in the purchase and sale of bonds. Victims are often sophisticated, institutional-sized investors. The reason: undisclosed, excessive markups and markdowns.

Even sophisticated investors — like regional banks in Kentucky and elsewhere — are being charged excessive markups and markdowns on their fixed income portfolios. These excessive charges directly (and negatively) impact a customer's yield on their fixed income portfolio.

Contact Our Attorneys To Learn More

So back to the question: What is an excessive markup/markdown? Or conversely: What is fair and reasonable? Based on the regulatory actions of FINRA, it is clear that markups and markdowns as low as 2.75 percent and perhaps even lower may be deemed excessive in the eyes of the regulators. How much are you paying for your fixed-income portfolio?

If you have questions or concerns concerning the fixed income securities or other investments in your portfolio, call us to schedule a free consultation. We can be reached through our online form or by calling 800-783-1413.