Municipal Bond Forum
New bond issues
Q
I am unable to determine how I can purchase municipal bonds during the “initial offering period” when the purchase fees are paid to the initial seller. It appears that the brokers are now buying up the bonds for their own accounts and then selling them back to their clients at an additional fee. I consider this double dipping and taking unfair advantage of their clients! How do I prevent this? What system and procedure is necessary?
A
James A. Klotz responds:
Your broker should be willing to take your order for a new bond issue if his firm is involved in the underwriting syndicate. If your order is submitted during the “order period” and the bonds are available, you will receive your bonds at the original terms. If it is a “hot issue” and the order period is “oversubscribed,” larger orders will take precedence and your order may not be filled.
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The responses provided in this forum are meant to address specific questions posed by investors about their municipal bonds and to provide market insight for our general audience. Please note, your investments, objectives, results and experience may differ significantly. Our answers and any potential strategies discussed should not be construed as a solicitation to buy nor sell any security or investment product. All investing entails risk.
