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Flashcards in Chapter 1.5 Deck (14):
1

Municipal Principal

Every municipal securities broker/dealer must have at least two Municipal Securities Principals except:

-Those firms who are a member of a registered securities association and conduct a general securities business, in which case only one MSRB principal is required.
-Those firms having fewer than 11 full-time persons engaged in its municipal securities activities, in which case only 1 MSRB principal is required.

2

The designated municipal principal must:

-Review and approve in writing all municipal discretionary accounts.
-Review and approve in writing the opening of all new accounts(New account report form signed by a RR and a principal, but not by the customer)
-Review and approve in writing all purchases and sales of municipal transactions on a daily basis
-Review and approve in writing research reports prior to use
-Supervise other registered personnel
-Enforce supervisory procedures
-Ensure that all procedures are in writing

3

Registered Principals do Not:

-Have to approve each transaction prior to entry
-Establish transaction fee schedules

**There is NO such designation of "Municipal Compliance Principal"

4

Municipal Securities Sales Principal

Supervisory activities are limited exclusively to supervising sales to and purchases from customers of Municipal securities. A municipal Securities Sales Supervisor would not be allowed to approve research reports.

5

Municipal Securities Registered Representative

-Generally may not act in a supervisory position
-Is exempt from taking the series 52 exam if they have taken and passed the Series 7. Series 52's cannot sell funds or UIT's.
-If a trainee fails the exam, they must wait:
-1st Attempt: 30 days
-2nd Attempt: 30 days
-3rd Attempt: 180 days

**The 90 day apprenticeship period for Municipal Registered Representatives has been eliminated.

6

OSJ Principal requirement

OSJ's are required to have a registered principal in the office. A non-OSJ branch can have a registered representative or registered principal as the supervisory person.

7

What do you need to sell only municipal funds or variable securities?

Series 6 or Series 7

8

Municipal Advisor

A person or entity that:
-Provides advice to or on behalf of a municipal entity or obligated person with respect to municipal financial products, including the advice with respect to the structure, timing, terms, and other similar matters concerning such financial products or issues.
Or
-Solicits a municipal entity, for compensation, on behalf of an unaffiliated municipal securities dealer, municipal advisor, or investment adviser to engage such party in connection with municipal financial products, the issuance of municipal securities, or investment advisory services.

9

When is a Municipal Advisor required to register with the SEC?

If the advisor provides advice on the issuance of municipal securities or about investment strategies or municipal derivatives. Registration must be accomplished by filing form MA with the SEC.

10

Qualifications and Waivers

-Waiver of qualification examinations would only be given by:
a. Registered securities association
b. One of the 3 bank regulators
-Waivers are only considered if a person comes from a closely related field
-Waiver of financial and operations principal - waived only by a registered securities association.
-If a person is promoted to a position which requires further registration, that person has 90 days to obtain the proper registration.
-If a registered person is expelled by any association or exchange, reinstatement would be required from the SEC.

11

A dealer must prepare written inspection reports noting testing and verification procedures for:

-Safeguarding customer funds and securities
-Maintaining books and records
-Supervising customer accounts
-Transmitting funds between customers and registered representatives and between customers and third parties
-Validating customer address changes
-Validating changes in customer account information

12

What must a person do if they haven't been associated with a firm for two or more years?

They are required to take and pass the required exams again

13

Fidelity Bonding

-The minimum coverage must be at least $100,000, but may be higher depending on the b/d's net capital requirement.
-A deductible provision may be included of up to 25% of the fidelity bond coverage
-Each member shall make required adjustments annually as of the yearly anniversary date of the issuance of its fidelity bond. The adequacy and adjustment is based on the firm's highest net capital requirement during the 12 month period that ends 60 days before the yearly anniversary date to provide the firm time to determine its required coverage by its anniversary date.
-Each member must, within 10 days, report any cancellation, termination or substantial modification of the bond to FINRA.
-Fidelity bonding does not cover the firm against a decline in the value of it's inventory.

**Under MSRB rules, Bank dealers are not required to maintain fidelity bonding.

14

Records

All firms must maintain a written record of all persons responsible for the maintenance of records and their responsibilities. Persons would include:
-Municipal Principal
-Municipal Securities Sales Supervisor for complaints, approval and review of accounts, transactions, and correspondence.

**The financial and operations principal has been eliminated as a designation by the MSRB. FINRA still maintains the designation for persons responsible for the maintenance of records and net capital computations.