Duties of a Broker’s Broker
Recall that a broker’s broker is a municipal securities dealer that buys and sells municipal securities on behalf of other dealers.
When a broker’s broker executes a transaction on behalf of a dealer, the MSRB requires it to make a reasonable effort to obtain a fair and reasonable price given current market conditions. The broker’s broker is expected to give the transaction the same care and diligence it would for a transaction for its own account. The broker’s broker must do nothing to work against the dealer’s interest in terms of pricing.
When participating in a bid-wanted, the broker’s broker is presumed to be acting on behalf of the seller unless the seller and bidders have agreed otherwise in advance. A bid-wanted is an auction for the sale of securities in which the seller doesn’t set a minimum price for the sale. The identities of the bidders and sellers are not disclosed to anyone other than the broker’s broker before the securities are sold. Bidders submit their bids to the broker’s broker, and the seller decides whether to accept the winning bid.
Making a reasonable effort to get a fair and reasonable price for the seller includes circulating information about the bid-wanted to ensure that it is seen by dealers who would be interested in the securities for sale. However, the broker’s broker is not required to get a specific number of bids.
If the securities are unlikely to be of interest to a lar