S-53 Flashcards
(127 cards)
1
Q
What information must be included and kept current in an associated person’s personnel file?
A
Past employment must be verified with all employers over the last three years. The file must also include any convictions over the last ten years.
2
Q
Jones and Company, a municipal securities broker-dealer, currently has fifteen full-time employees, of which nine are associated persons. How many municipal securities principals must Jones and Company appoint?
A
Since there are fewer than eleven full-time associated persons at Jones and Company, only one municipal securities principal is required. If Jones had eleven or more associated persons, the requirement calls for two municipal securities principals. This number could increase as the number of associated persons increases.
3
Q
An associated person is defined as:
A
An associated person is any employee who performs municipal securities dealer activities that are not clerical or ministerial in nature. Such persons must register by passing a qualifying exam.
4
Q
A firm’s written supervisory procedures must provide for the prompt review and written approval by a municipal securities principal of:
- The opening of each customer account in which transactions for municipal securities may be effected
- Each transaction in municipal securities
- The handling of all written customer complaints pertaining to transactions in municipal securities
- All advertising relating to municipal securities activities
A
All of these statements are true.
5
Q
Which of the following choices would always be a cause for denial of an individual’s accreditation and registration with a municipal securities broker or dealer?
- Willful violation of the Securities Exchange Act
- Censure by a registered securities association
- Failure to reasonably supervise a person who violated the Securities Exchange Act
- Expulsion from a self-regulatory organization
A
There are various reasons that an individual’s registration would be denied. Among them are a previous willful violation of the Securities Exchange Act of 1934, failure to reasonably supervise a person who violated the ‘34 Act and a prior expulsion from an industry SRO. However, a censure will not be a cause for denial of an individual’s registration.
6
Q
What are some reasons that could be a cause for denial of an individual’s accreditation and registration with a municipal securities broker or dealer?
A
- Willful violation of the Securities Exchange Act of 1934,
-Failure to reasonably supervise a person who violated the ‘34 Act and a
-Prior expulsion from an industry SRO.
However, note that a censure will not be a cause for denial of an individual’s registration.
7
Q
Is a Preliminary Official Statement considered “Adavertising”
A
No. Therefore approval by a principal is not required.
8
Q
Mackinnsey Securities has decided to leave the municipal bond business and focus on higher margin equity trading. What step(s) must the firm take when leaving the business?
A
Municipal firms are required to give the MSRB prompt written notice when exiting the business. There is no termination fee nor minimum notice that must be given to customers. Written permission is not required of the MSRB.
9
Q
Which events would always be cause for denial or revocation of an individual’s registration with a municipal securities broker-dealer?
A
Suspension from an SRO will not result in the revocation or denial of a person’s registration. However, a willful violation of the ‘34 Act, expulsion from an SRO, or an intentional misstatement on the U4 will be cause for denial or revocation of registration.
10
Q
An apprentice may do which of the following? Buy bonds from another broker-dealer Buy bonds from an insurance company Sell bonds to another broker-dealer Buy bonds from an institutional customer
A
During the 90-day apprenticeship period, a trainee may discuss the purchase and sale of municipal securities with other securities professionals only. An apprentice may not contact the public.
11
Q
A copy of the MSRB manual must be available in all departments EXCEPT:
A
Municipal securities firms must keep a copy of the MSRB rules in each office in which any of the following activities take place:
Underwriting, trading or sales of municipal securities
Financial advisory or consultant services for issuers
Research or investment advice with respect to municipal securities
Any other activities which involve communication, directly or indirectly, with public investors in municipal securities
Clearing activities are not included on this list.
12
Q
For the purpose of verifying information provided on an employment application by a prospective associated person, a municipal securities dealer shall make inquiry of all employers of the person during the:
A
Three years immediately preceding the application
While a prospective associated person must provide information on all employers within the preceding ten years, the broker-dealer only has to make inquiry of the employers during the past three years.
13
Q
What are MSRB guidelines regarding gifts?
A
The MSRB’s gift limit is $100 per person per year when given in connection with the business of the recipient’s employer. Business expenses, as recognized by the IRS, would not fall within this rule so long as it is not frequent and excessive. Giving a person a season ticket to a sporting event would be considered excessive and would thus violate this rule.
14
Q
A research report must be approved by a municipal securities principal in all of the following cases EXCEPT where the report is only:
a) Being sent to the manager of the firm’s syndicate department
b) Being sent to the trust departments of large banks
c) Sent to the managers of municipal bond funds
d) Distributed to customers who currently own the securities addressed in the research report
A
Being sent to the manager of the firm’s syndicate department.
Any correspondence being sent to customers pertaining to municipal securities activities must be approved by a municipal securities principal. Choices (b), (c), and (d) all refer to sending a research report to a customer. The report would not have to be approved if it is kept within the firm for internal use only.
15
Q
When designating an e-mail contact at the firm, the MSRB rules require that the individual be registered:
A
As a municipal securities principal
The e-mail contact person must be designated by the firm and the name filed with the MSRB on Form G-40. This person will serve as the official contact person for purposes of electronic mail and must be registered as a municipal securities principal.
16
Q
What is Rule G-23?
A
The MSRB created rule G-23 to establish ethical standards and discloseure requirements for any broker-dealer that acts as a financial adviser to issuers with respect to the issueance of municipal securities.
17
Q
Can a BD that has a Financial Advisory relationship with an issuer act as an underwriter to that issuer?
A
No. A BD that has a Financial Advisory relationship is prohibited from acting as an underwriter with respect to the same issuer of municipal securities.
18
Q
Can a BD that has a Financial Advisory relationship with an issuer act as remarketing agent for the issuer?
A
No. A BD that has a Financial Advisory relationship is generaly prohibited from acting as a remarketing agent with respect to the same issuer of municipal securities.
19
Q
Acting as an underwriter or as a financial adviser must be clearly notified to the issuer at the earliest possible stage fo the process.
A
True. and in general acting as an underwriter also involves the structure, timing, and terms of the issue.
20
Q
SEC Rule 15c2-12 Municipal Securities Disclosure
A
Underwriters must have reasonable basis for recommending a municipal security. In order to do this, an underwriter must obtain and review the Official Statement, and has certain obligations to send customers copies of the preliminary Official Statement, must contract with the issuer to obtain sufficient copies of the Official Statement within 7 days of upon entering into an agreement to purchase, offer, or sell the securities.
21
Q
SEC Rule 15c2-12 Municipal Securities Disclosure pertains to issues of $1,000,000 par value or more. Exempted are:
A
Offers of $100,000 or more that:
- are sold to no more than 35 sophisticated investors (limited placement)
- have a maximum maturity of 9 months or
- have tender or put features as frequent as every 9 months to maturity.
22
Q
MSRB Rule G-32
A
Addresses disclosure requirements in connection with primary offerings, and submissions to the electronic municipal market access (EMMA) system.
23
Q
The SEC has the right to censure, impose fines and suspensions on municipal securities firms and their registered persons. The maximum suspension that may be imposed on a registered person by the SEC is:
A
Twelve months
24
Q
On February 6, your firm appointed a new e-mail contact principal for MSRB communications. The firm must file an amended Form G-40 with the MSRB:
A
If a firm changes the name of the primary e-mail contact, it is required to electronically file an amended Form G-40 with the MSRB. This must be done promptly, but no later than 30 days following the change. The firm is also required to review and update or affirm the information on Form G-40 within 17 business days after the end of each calendar year.
25
Your firm is a member of the New York Stock Exchange and conducts a general securities business with the public. In the municipal bond trading area, the firm employs thirty-five associated persons, one municipal securities principal (Series 53), and one municipal fund securities limited principal (Series 51). Is the firm in violation for not having enough principals supervising its municipal activities?
Every municipal securities firm needs two municipal principals unless it is a member of a registered securities association, or has fewer than eleven associated persons engaged in municipal securities activities. In this case, the firm needs only one principal since it is a member of an exchange.
26
A record of each person designated with the responsibility of supervising the activities of a municipal securities dealer must be kept for:
A record of each person designated for the responsibility of supervising the activities of a municipal securities dealer must be kept for six years. If the person designated changes, the records must be kept for six years following the date of the change
27
Duties of the principal in charge of a municipal Office of Supervisory Jurisdiction include:
- All customer transactions and correspondence sent by municipal securities representatives to customers
- The person in charge is required to review the daily blotter, as well as
- The statements sent to customers to determine the suitability of recommendations based on the customer's investment objectives and financial means.
- The review of representatives should be continuous, not annual.
28
The MSRB will assess a dealer a fee except:
The MSRB charges dealers an assessment fee for both primary and secondary market transactions. An exception is made for any security that has a final maturity of nine months or less.
29
A registered person who has been in the securities industry for 9 years is subject to the Regulatory Element of continuing education
In two more years
The Regulatory Element of continuing education begins on the second anniversary after a registered person's initial registration. The Regulatory Element training reoccurs every three years after the first anniversary. Therefore, the registered person in the question has had Regulatory Element training on her second, fifth, and eighth anniversary. The next sitting for training would be on her eleventh anniversary.
30
MSRB policy towards supervision of Municipal securities business requires:
A person supervising municipal securities business is required to pass the Series 53. So is a person supervising the training of municipal securities representatives, but, the individuals conducting the training are not.
If a person has not passed the Municipal Securities Principal Examination by the end of the grace period, she is not permitted to function in a supervisory capacity. The MSRB allows a candidate a 90-day grace period to pass the Municipal Securities Principal Examination. In order to function as this type of principal prior to passing the examination, the person is required to be qualified as a general securities representative (Series 7), municipal securities representative (Series 52), or general securities principal (Series 24). A person qualified as a municipal securities principal is permitted to approve her own transactions if she is also qualified as a municipal securities representative. It is important to remember that the Series 52 is always considered a prerequisite for the Series 53. The Series 7 is only considered a prerequisite for the Series 53 if the person passed the Series 7 examination prior to November 7, 2011.
31
Your firm has employees who are only engaged in the sale of both municipal bonds and municipal fund securities. Which of the following statements is TRUE regarding the requirements for a minimum number of principals?
The firm is required to have two municipal securities principals
Every municipal securities firm is required to have at least two municipal securities principals. A municipal securities principal (Series 53) is permitted to supervise the sale of all municipal securities including municipal fund securities. There is no requirement to have a separate municipal fund securities limited principal. A municipal fund securities limited principal (Series 51) may be included when determining the required number of principals if the firm limits its business exclusively to the sale of municipal fund securities.
32
The MSRB allows a candidate seeking to be qualified as a municipal securities principal a grace period if the person is functioning as any one of the following EXCEPT a:
Financial and operations principal
The MSRB allows a candidate a 90-day grace period to pass the Municipal Securities Principal Examination (53). In order to function as this type of principal prior to passing the examination, the person is required to be qualified as a general securities representative (Series 7), municipal securities representative (Series 52), or general securities principal (Series 24).
33
What is EMMA?
Electronic Municipal Market Access which is a centralized online source for free access to municipal disclosures, market transparency data and educational materials about the municipal securities market. EMMA is operated by the MSRB. It contains important information about a Municipal bond issuance, the use of the funds, and notices throught the life of the bonds as well as secondary market transactions submitted by dealers. EMMA receives transactional information from the MSRB's Real-time Transaction Reporting System (RTRS).
emma.msrb.org
34
What Is an Official Statement?
An official statement is a document prepared by or on behalf of a state or local government or other issuer of municipal securities in connection with a new issue of municipal securities that discloses material information on the offering of the securities.
An official statement describes the essential terms of the bonds. It typically provides the most detailed description of the terms and features of the bonds through maturity. Information in an official statement includes, but is not limited to, the terms under which the bond can be redeemed prior to maturity; financial information or operating data concerning the issuer and other entities,enterprises, funds, accounts or other persons material to an evaluation of the offering; the source of money pledged to repay the bonds; and the state or local government’s covenants for the benefit of investors.
35
What Is an Advance Refunding Document?
A refunding is a refinancing of existing "refunded" bonds with new "refunding" bonds. Similar to a homeowner who obtains a new mortgage with a lower rate to pay off an older, more expensive mortgage, an issuer of refunding bonds often seeks to lower its interest payments by paying off bonds it has previously issued with newly issued refunding bonds that pay interest at a lower rate than the original refunded bonds. In an advance refunding, rather than paying off the old debt immediately, the proceeds of the new refunding bonds are placed in an escrow account to be applied according to a predetermined schedule to the future payment of principal and interest on the old refunded bonds.
36
Which of the following statements is TRUE concerning a municipal securities dealer's internal inspection procedures?
Each muni-OSJ and municipal branch office that supervises one or more nonbranch locations must be reviewed on an annual basis. Branch offices that do not supervise one or more nonbranch locations should be reviewed every three years and nonbranch locations should be reviewed periodically.
37
What is RTRS?
It is the MSRB's Real Time Transaction Reporting System. Where Dealers report secondary market transaction prices.
38
What is the Underwritter Spread?
It is the difference between what the underwriters paid the issuer for the bonds and the price at which these bonds are sold to investors. The spread is distributed amongst members of the syndicate and the selling group. A selling firm that is not a member of the syndicate is only entitled to the concession.
39
Obligations of the SEC Rule 15c2-12 require:
- Obtain and review the Official Statement before bidding on or buying the securities.
- Contract with the Issuer to receive the Final Official Statement (in sufficient copies) to distribute to customers.
- Send a copy of the Official Statement to potential customers within 1 business day of request.
40
What is a Syndicate Letter?
Syndicate Letters are sent out by the Syndicate Manager to invite other firms to participate. The letter will specify oblications and participations of the members.
41
What is SMMP?
Sophisticated Municipal Market Specialist. It is one where the dealer has reasonable basis to believe is capable of evaluating investment risks and market value independently, and affirmatively indicates that it is exercising independent judgement.
42
What is Eastern account?
A method for determining liability in an underwriting of a new issue of municipal securities, as set out in the agreement among underwriters, in which each member of the underwriting syndicate is liable for any unsold portion of the issue according to each member’s percentage participation in the syndicate. Almost all syndicates are structured as undivided accounts
43
What is Western account?
A method for determining liability in an underwriting of a new issue of municipal securities, as set out in the agreement among underwriters, in which each member of an underwriting syndicate is liable only for the amount of its participation in the issue and not for any unsold portion of the participation amounts allocated to the other underwriters
44
What is MFP?
Municipal Finance Professional
45
Political Contributions - Ban on Business occurs when and for how long?
Municipal Securities Firms are prohibited from engaging in specified municipal business with issuers for 2 years if certain political contributions are made to officials of those issuers. If the MFP is entitled to vote for the official, and the contribution is limited to < $250, the ban is not triggered.
46
What does form G-37 Tack?
Among other things, Political contributions. This form is filed quarterly and made public by the MSRB.
47
Pursuant to MSRB rules, a municipal securities sales principal (Series 10) may engage in all of the following supervisory activities :
- Giving final approval to the opening of new accounts
- Reviewing customer transactions at the end of each day
- Reviewing correspondence by registered representatives in a branch office
- But NOT the Supervising the underwriting of a small bond issue in a branch office
48
Among the responsibilities of an OSJ manager is:
A municipal Office of Supervisory Jurisdiction (muni-OSJ) is an office of a member firm that is specifically authorized to supervise municipal securities representatives under written supervisory procedures. An Office of Supervisory Jurisdiction may be managed by anyone who has passed the appropriate principal examination. Among the responsibilities of an OSJ manager is the approval of new accounts, of discretionary and nondiscretionary orders on a daily basis, and of communications sent to the public prior to being sent to clients and not on a periodic basis. The manager of an OSJ has the responsibility of ensuring compliance with securities laws and MSRB rules.
A branch office may or may not be designated as an OSJ, at the discretion of the member firm. For example, a firm might have two branch offices in San Francisco. A firm could appoint each branch an OSJ, or it might make one branch an OSJ with the responsibility of supervising municipal securities representatives within its own office and the other branch office. In this case, the manager of the OSJ would be responsible for ensuring compliance as indicated previously and would be required to inspect each branch office frequently.
49
A municipal securities sales principal is permitted to supervise which of the following activities?
A municipal securities sales principal is a person associated with a municipal securities dealer or broker who supervises representatives in their handling of customer accounts and related activities. The activities a sales principal may be responsible for include:
-Approving transactions with customers
-Approving the opening of customer accounts
-Approving discretionary accounts and related transactions
-Reviewing all customer accounts regularly
-Supervising the handling of written customer complaints
-Reviewing correspondence with customers regarding the solicitation or execution of municipal securities transactions
The sales principal may not supervise activities such as trading, underwriting, research, or providing financial advice and counseling to issuers. These activities would be the responsibility of the municipal securities principal.
50
Concerning the duties of a financial and operations principal associated with an MSRB member firm functions:
A financial and operations principal supervises financial reporting and the processing, clearing, and safekeeping of municipal securities. This principal's duties include:
-Approval of, and responsibility for, financial reports required to be filed with the SEC or any self-regulatory organization
-Supervision of individuals who assist in the preparation of financial reports
-Overall supervision of, and responsibility for, individuals who are involved in the actual maintenance of the books and records from which financial reports are derived
-Overall supervision of, and responsibility for, all individuals who are involved in the administration and maintenance of the processing and clearance functions of the municipal securities broker-dealer
-Overall supervision of, and responsibility for, individuals who are involved in the administration and maintenance of the safekeeping functions of the broker-dealer.
Municipal securities firms need only one financial and operations principal. A person qualifies as a financial and operations principal by passing the Financial and Operations Principal Examination (Series 27) or Introducing Broker/Dealer Financial and Operations Principal Examination (Series 28).
51
Auction Rate Securities are?
Long term securities whose interest is set as a Dutch auction, the rate is set at the lowest rate that matches supply and demand. If the auction fails, the investor may not have immediate access to his funds. The interest or dividend rate is reset at specified intervals.
52
The registration status of a registered person who either volunteers or is called up for U.S. military service is:
Special inactive status
53
What information must be disclosed to a customer buying a new issue of municipal bonds underwritten on a negotiated basis?
The total underwriting spread
54
Transactions must be reported to the RTRS within how long of Trade?
within 15 minutes of time of trade.
55
Final settlement of a syndicate account occurs ?
Final settlement of the syndicate account must occur within 30 calendar days following the date all securities have been delivered by the issuer to the syndicate.
56
Under MSRB rules, a syndicate is an account formed by two or more parties for the purpose of purchasing all or part of a new issue, with the intention of:
In the MSRB's rules, a syndicate is an account formed by two or more persons for the purposes of purchasing, directly or indirectly, all or part of a new issue, with the intention of distributing the securities (selling them to the investing public).
57
Which of the following statements are TRUE about the MSRB's underwriting fee?
The underwriting fee must be paid to the MSRB no later than 30 days following the date that the invoice is sent to the managing underwriter. Offerings with a final stated maturity within nine months of issuance or those having an aggregate par value of less than $1,000,000 are not subject to this fee. The underwriting fee may not be used to offset the continuing registration requirement for which there is an annual fee of $100.
58
When must the investor brochure be delivered?
The MSRB's investor brochure must be sent promptly upon receipt of a customer complaint, regardless of the dollar amount or severity of the complaint.
59
A syndicate formed for the purpose of purchasing and distributing a new municipal issue that will mature in less than 24 months is a(n):
Qualified note syndicate
Under MSRB rules, a qualified note syndicate is defined as a syndicate formed for the purpose of purchasing and distributing a new municipal issue that will mature in less than 24 months. In addition, the new issue may not be purchased by the syndicate on an all-or-none basis, and the syndicate has stipulated that there is no order period. Only group orders will be accepted, and the syndicate may buy or sell the securities for its own account. (77670)
60
Regarding independent Judgement excercised by a SMMP. The SMMP must indicate ...?
A SMMP must affirmatively indicate that it is exercising independent judgment in evaluating the recommendations of the dealer. The sophisticated municipal market professional's affirmation may be made either orally or in writing, and may be based on the type of security or for all of the transactions in the account. (77705)
61
Municipal syndicate account records must show all of the following information:
The syndicate manager must keep certain records on behalf of the syndicate, including:
- description and aggregate par value of the securities
- name and percentage participation of each member
- terms and conditions governing formation and operation of the syndicate
- all orders received for the purchase of securities from the syndicate (except bids at other than the syndicate price)
- all allotments of securities and the price at which sold
- the date and amount of any good-faith deposits
- date of settlement with the issuer
- date of closing of the account
- a reconciliation of profits and expenses
Names and addresses of customers buying the securities from syndicate members do not have to be recorded. (77642)
62
For retail accounts, what account information is the firm required to keep a record of?
The account records for a broker-dealer must reflect the following information for a retail customer.
- The customer's name and residence or principal business address
- Whether the customer is of legal age
- A tax identification or Social Security number
- The customer's occupation
- The name and address of the employer
- Information that will be taken into consideration when making recommendations to the customer (i.e., financial background, tax status, and investment objectives)
- The signature of the municipal securities representative who introduces the account to the firm and the signature of a municipal securities principal indicating acceptance of the account
- Whether the customer is employed by another broker-dealer or municipal securities dealer
- The customer's signature, although usually obtained, is not required.
63
The day on which all competitive bids must be submitted to the issuer is the:
he day on which all competitive bids must be submitted to the issuer is the date of sale. For a negotiated issue, the date of sale is the day on which the contract to purchase the securities from the issuer is executed. (77656)
64
Is a municipal securities dealer's able to pay a nonaffiliated consultant to solicit municipal securities business?
No. A broker-dealer, or municipal securities dealer, may not agree to pay, either directly or indirectly, any person who is not affiliated with the firm for soliciting municipal securities business on behalf of the firm.
65
What is RTTM
Real-Time Trade Matching Portal is used only for submitting or modifying data with respect to interdealer transactions.
66
Is the Municipal Underwriting firm required to review the accuracy of the Issuer's disclosure?
Under SEC Rule 15c2-12, an underwriter of municipal securities must have a reasonable basis for recommending a security. In order to fulfill this obligation, the underwriter is required to review the accuracy of the issuer's disclosure information. (77691)
67
What is NIIDS?
New Issue Information Dissemination Service
According to MSRB Rule G-34, in order to act as an underwriter of municipal securities with maturities of greater than nine months, a municipal securities dealer must register to use the New Issue Information Dissemination Service (NIIDS). NIIDS was developed by the Depository Trust Corporation (DTC) to distribute information it receives from underwriters in order to assist dealers in meeting the requirement for prompt reporting on municipal bond trades.
68
What is SHORT?
The Short-term Obligation Rate Transparency (SHORT) system is used to collect information on variable rate demand obligations (VRDOs) and auction rate securities (ARS). (77740)
69
Copies of confirmations must be maintained for how long?
3 years.
70
Employment Agreements must be maintained for how long?
6 years.
71
According to Rule G-11 a "management fee" indicates?
The term "management fee" indicates any amount to be realized by a syndicate manager, and not shared with the other members of the syndicate. (77594)
72
What is "Parking" a security?
Parking refers to the practice of temporarily holding a position for a customer, often to avoid certain regulatory filing or net capital requirements, and it is prohibited. (77783)
73
What is the limitation and under what rule are political contributions covered?
Municipal finance professionals are limited to a maximum contribution of $250 per official, per election in which they are entitled to vote. Contributions in excess of $250 will trigger a two-year business ban under Rule G-37.
74
Priority provisions used in the allocation of a new issue can be modified or not? by whom?
MSRB rules require each syndicate to establish written priority provisions and procedures to modify those provisions. The syndicate manager is permitted to modify the established priority provisions on a case-by-case basis, but must be prepared to justify these changes to the other syndicate members as being in the best interests of the syndicate. (77622)
75
The annual fee MSRB firms must pay is how much by when?
Each MSRB member must pay an annual fee of $500 by October 31 of the fiscal year for which the fee was paid. All firms pay the same fee regardless of their size. Moreover, payment must be accompanied by a letter stating the member's name, address, and commission registration number. (77762)
76
The new-issue disclosure period begins and ends when?
According to MSRB Rule G-32, the new issue disclosure period begins with the first submission to an underwriter of an order for the purchase of a new municipal bond or the purchase of these securities from the issuer. The period ends 25 days after the final delivery by the issuer of the new municipal bond to the underwriter. (77671)
77
The following information was published by a municipal securities dealer:
40 Michigan 4 3/1/96 5.50
All quotations, unless otherwise indicated at the time made, are subject to prior sale or purchase and to subsequent changes in price. (78182)
78
For the purpose of verifying information provided on an employment application by a prospective associated person, a municipal securities dealer shall make inquiry of all employers of the person during the:
Three years immediately preceding the application
79
A dealer involved in a new competitive offering must apply for a CUSIP number:
In a competitive deal, municipal bond dealers must apply for a CUSIP number no later than the date of award. If the offering is negotiated, the dealer must apply on or before the business day the contract to purchase the securities from the issuer is executed. (77566)
80
Assets that are held in a Section 529 college savings plan may be transferred to another beneficiary without penalty:
The assets in a Section 529 plan may be transferred to a new beneficiary once per year without restriction. (77923)
81
A recommendation to purchase a private activity bond would NOT be appropriate for a:
Single person who is subject to the alternative minimum tax
A private activity bond is a type of municipal bond where the funds raised primarily will benefit a nonpublic (private) company. An airport terminal for an airline is an example. The interest from these bonds is taxable at the federal level if the person receiving the interest is subject to the alternative minimum tax (AMT). These bonds are least suitable for a client who is subject to the AMT. (77657)
82
The syndicate manager must disclose to the syndicate members, in writing, within two business days from the date of sale:
The syndicate manager must disclose to the other members of the syndicate, within two business days following the date of sale, a summary, in writing, by priority category, of all allocations of securities which are given priority over members' takedown orders. The summary will include: the aggregate par value, maturity date and price of each maturity, and must include any allocation to an order confirmed at a price other than the original list price. (77608
83
A municipal securities dealer executes a transaction at 7:30 p.m. on Tuesday, October 7th. When is the dealer required to report the transaction?
Transactions in municipal securities are generally required to be reported within 15 minutes of execution to the Real-Time Transaction Reporting System (RTRS), which is operated by the MSRB. The RTRS is open from 7:30 a.m. until 6:30 p.m. Any transaction executed outside the hours that the RTRS is open must be reported no later than 15 minutes after the next opening of the RTRS. The system would next open on Wednesday, October 8th at 7:30 a.m. and the trade must be reported by 7:45 a.m. on that day. (78204)
84
What is an Eastern or Undivided account?
In an undivided or Eastern account, a member has liability for any unsold amount in proportion to its original commitment. It does not matter whether it has met its own commitment or not; it is still liable for the original percentage commitment on the amount remaining unsold by the syndicate as a whole.
85
As to Complaints:
Written complaints may be answered in written or oral form. Any response given must be noted and filed with a copy of the original complaint. The original complaint must be reviewed and initialed by a principal. (78057)
86
What is NSCC
National Securities Clearing Corporation.
The vast majority of trades must be reported to the NSCC regardless of size or settlement terms. Trades in securities that are ineligible for inclusion in the CUSIP system are exempt. (78197)
87
The term order period means:
The term order period means the period announced by the syndicate during which orders will be solicited for the purchase of municipal securities held in syndicate (in the syndicate account for the benefit of the entire syndicate). (77539)
88
What does the Official Notice of Sale contain?
When new municipal bonds are to be sold through competitive bidding, the municipality advertises the sale in a financial publication using an Official Notice of Sale. This ad includes such items as the amount of bonds to be issued, the time and place of bid-opening, the amount of the good-faith deposit, the maturity scale, when interest will be paid, the firm preparing the legal opinion, the place where interest will be paid, and whether there are any call provisions. The Notice of Sale does not give the identity of the underwriting syndicate members since this is not determined until the bonds have been awarded. (77609
89
Form G-37 listing contributions to political parties and candidates made by the firm or its employees must be filed with the MSRB:
Each calendar quarter
Firms must submit two copies of Form G-37/G-38 to the MSRB by the last day of the month following the end of each calendar quarter. (77644)
90
Can Brokers prospect MSRB securities from home?
Calling from home is subject to MSRB Rule G-39 as well as any internal policies of the firm
Brokers are allowed to prospect from home if permitted by their firm, but must follow all federal telemarketing, MSRB, and firm rules. (78113)
91
Under Rule G11 regarding disclosures, what disclosures must the syndicate member make when it enters an order to buy securities held by the syndicate?
MSRB Rule G-11 requires every broker, dealer, or municipal securities dealer that is a member of a syndicate to make certain disclosures. The dealer must disclose, at the time of submission of a purchase order for securities held by the syndicate, that the securities are being purchased for its dealer account, for the account of a related portfolio, for a municipal securities investment trust sponsored by such dealer, or for an accumulation account established in connection with such a municipal securities investment trust. No disclosure is required if the dealer is purchasing for a client's account except for group orders. (77560)
92
A copy of the MSRB's investor brochure must be distributed to:
All customers lodging a written complaint
93
ammendments to MSRB rules become effective when?
Amendments become effective no earlier than 10 business days after publication by the Board. (77700)
94
Under MSRB who are not customers?
A BD is not considered a Customer, neither is an issuer involved in a primary distribution of its own securities.
95
What is Primary Distributor? Selling Dealer?
When an issuer uses the services of a dealer for marketing purposes, the firm is known as a primary distributor. As a primary distributor, the firm may enlist the aid of other broker-dealers who are known as selling dealers. (77918)
96
The time limitation for submitting disputes to arbitration is:
The time limit for submitting disputes to arbitration is six years from the event that created the dispute. (78093)
97
A municipal securities dealer that has previously purchased book-entry form securities from another dealer has filed an interest payment claim. How long before he must respond?
If a municipal securities dealer believes it did not receive the proper amount of interest due on a security sold or purchased, it may file an interest payment claim. The dealer receiving the claim form is required to either send payment to the dealer it received the claim from (not the customer), or respond no later than 10 business days following receipt of the claim. If the claim involves an interest payment that was scheduled more than 60 days before the date of the claim, the firm must respond no later than 20 business days following receipt of the claim. (78023)
98
Sales credits for designated orders must be distributed to the members of the syndicate within
Syndicate credits must be distributed to the members of the syndicate within 10 days following the date the issuer delivers the securities to the syndicate. (77540)
99
The purchaser of a municipal security may initiate a close-out procedure no earlier than the:
The purchaser of a municipal security may initiate a close-out procedure no earlier than the fifth business day following the settlement date. The earliest date for initiating the close-out deadline is ten business days from the date of the notice (a telephone call) from the buyer to the seller. The execution period during which the close-out may be completed is up to five business days from the deadline date. (78030)
100
An accumulation account is
An accumulation account is an account established in connection with a municipal securities investment trust to hold securities pending their deposit in the trust. (77638)
101
Walle Securities is participating as a syndicate member in an offering by the City of Orlando. Disclosure is required for which TWO of the following orders?
Disclosure of capacity is required to the other members of the syndicate if the order to purchase the new issue is for: the dealer's own account, the account of a related portfolio, a municipal securities unit investment trust, or an accumulation unit established for a municipal securities investment trust. For group orders, the identity of the person for whom the order is submitted must be disclosed. Similar disclosure is not required for designated orders unless they fall under one of the previously mentioned categories. (77659)
102
A Currency Transaction Report (CTR) must be filed within how many days following the transaction?
A Currency Transaction Report (CTR) is also called a FinCEN Form 104. It is filed by financial institutions for deposits and withdrawals made by a person that exceed $10,000 in a single business day. The form must be filed no later than the 15th day following the transaction. (78135)
103
All of the following records must be maintained by a municipal securities dealer
Among the other responsibilities of the syndicate manager is the requirement that they must keep books and records regarding syndicate transactions. For a new issue underwriting, the manager must include a description and aggregate par value of the securities, the name and percentage participation required of each member, and records showing orders received and securities allocated for each member in the syndicate. Also required are records showing the date and amount of any good faith deposit sent to the issuer, the date that the issue is delivered to the underwriters, the date that the underwriting agreement is signed, a record of all deliveries of official statements to purchasers of new issues, and copies of Forms G-36 (OS) and G-36 (ARD). There is no requirement to maintain a record of all customers who requested a copy of a preliminary official statement. (77687)
104
BAB bonds are taxable at the federal level?
These are an example of Direct Pay Build America Bonds (BABs). BABs pay taxable interest but the Treasury will reimburse 35% of the interest paid on the bonds to the issuer, which reduces the cost of borrowing. This allows municipal issuers to compete with corporate issuers when raising capital. (78072)
105
a Municipal Securities Sales Principal may supervise Sales to other Broker Dealers?
Only a municipal securities principal may supervise the sale of municipal securities to other brokers or dealers. A municipal securities sales principal may supervise the sale of municipal securities to customers. (77848)
106
what contributions need to be reported on form G-37/G-38?
Contributions that do not exceed the $250 contribution limit do not have to be reported on Form G-37/G-38. (77645)
107
A customer wishes to transfer an account from P. Stevens and Company to B. Wain and Company. Once the customer account transfer instructions have been validated by Stevens, the account transfer must be completed within:
Customer account transfer instructions must be validated by the dealer carrying the account (in this question, P. Stevens & Company). The account transfer must then be completed within four business days. (78058)
108
When a broker-dealer has a control relationship with respect to a municipal security, the broker-dealer may not purchase that security for a discretionary account unless the customer has authorized the transaction
Because of the conflict of interest involved, the customer must authorize this type of transaction in writing. (77744)
109
Secondary market. A municipal bond purchased at a discount, the discount will be treated as capital gain or ordinary income for tax purposes?
The discount on a municipal bond purchased in the secondary market is taxable as ordinary income. If a municipal bond is purchased when it is an original issue discount (OID) bond, the discount will be tax-free. If a municipal bond is callable, the representative must disclose the lower of the yield to maturity or yield to call (yield to worst). On a bond purchased at a discount, the yield to maturity would be lower than the yield to call. (78220)
110
According to the Municipal Securities Rulemaking Board, municipal fund securities would include which types of securities?
The MSRB and SEC define municipal fund securities as local government pools (LGIPs) and higher education trusts (Section 529 plans). (77912)
111
Who determines the freeze period in a close-out procedure?
The seller of the bonds
If the seller, at any time before a close-out is completed, believes it can deliver the bonds that it has failed thus far to deliver, it can give notice to the buyer of its intention to deliver the bonds. After the buyer receives the notice, it may not execute the close-out for two business days following the date of the notice and the period specified for the execution of the close-out is extended by two business days or, if notice is given on the last day specified for execution of the close-out, by three business days. (77983)
112
According to MSRB rules, subsidiary records are intended to reflect municipal securities
MSRB rules state that subsidiary records should reflect municipal securities in transfer, municipal securities borrowed or loaned, municipal securities to be validated, and municipal securities transactions not completed by the settlement date.
Securities to be issued will not be reflected in subsidiary records. (77955)
113
A retransmittal of a close-out notice increases the execution date for the close-out by:
A retransmittal of a close-out notice increases the execution date for the close out by five business days. Note, however, that this extension is added only for the first retransmittal. Subsequent retransmittals do not extend the close-out date. (77717)
114
At 11 a.m., a municipal securities dealer executes a transaction in a variable rate instrument that has a maturity of 6 months. This transaction should be reported:
hould be reported by 6:30 p.m
Most reports of transactions in municipal securities must be submitted to the RTRS within 15 minutes of execution. An exception is made for short-term instruments with a maturity of less than 9 months (commercial paper, auction-rate instruments, and variable rate instruments) that need to be reported by the end of the RTRS business day, which is 6:30 p.m. (78221)
115
Which of the following statements is TRUE when a retail order period is included in an underwriting agreement?
An underwriting agreement may include a retail order period which provides retail customers with the opportunity to purchase new municipal issues. The issuer determines what is considered to be an order from retail customers. An institution may place multiple small orders in an effort to create the appearance that the orders are from retail customers; however, this type of activity would be inconsistent with the issuer's expectations. (77732)
116
Dealer A enters into a transaction to sell municipal securities to Dealer B. Dealer A sends a confirmation to Dealer B, but fails to receive one from B. Within how many days following the trade date should A determine whether the trade has occurred?
4
If a dealer has confirmed a trade, but has not received a confirmation or DK notice from the other dealer, the confirming party must determine whether the trade has occurred beginning no earlier than the fourth business day following the trade date, but no later than the eighth business day following the trade date. (77998)
117
A bank which is also a municipal securities dealer acts as paying agent for an issuer of municipal securities. In that capacity, it obtains information regarding the ownership of that issuer's securities. They may use that information to solicit securities transactions:
With the consent of the issuer
No broker-dealer or dealer bank may use confidential, nonpublic information obtained when acting in a fiduciary or agency capacity for the issuer of municipal securities in order to solicit sales, unless consent of the issuer was obtained. (77627)
118
The senior syndicate manager is required to disclose to each member of the syndicate all available information concerning payments to syndicate and nonsyndicate members within:
10 business days following the date of sale
The senior syndicate manager is required to disclose to each member of the syndicate all available information concerning payments to syndicate and nonsyndicate members within 10 business days following the date of sale. (77683)
119
If a dealer receives account transfer instructions from another dealer, the instructions must be validated or protested within:
3 business days of receipt
A carrying dealer must either validate or protest account transfer instructions within three business days of receipt. If validated, the transfer must be completed within four business days of validation. If protested, both the carrying and receiving parties must promptly settle their differences. (78075)
120
A certificate for a municipal security is considered mutilated if any of the following conditions cannot be determined
if any following items cannot be determined:
- the name of issuer,
- par value,
- signature,
- coupon rate,
- maturity date (but not the coupon payment dates), - seal of the issuer,
- and certificate number. (78013)
121
MSRB rules specify how certain calculations should be made. The Board provides formulas for calculating accrued interest, dollar prices, and yields and how these figures are required to be disclosed.
Interim calculations should be carried out to ten decimal places. Before placing a number on a confirmation, the following adjustments should be made.
- Accrued interest must be truncated to three decimal places and then rounded to two places.
- Dollar prices must be truncated to three decimal places.
- Yields must be truncated to four places and rounded to three.
122
How long must records of Confirmations be kept?
3 years
123
How long must records of Agency transactions be kept?
3 years
124
How long must employment contracts and information about gifts and gratuities be kept?
6 years
125
According to the MSRB fair dealing rules,
The more complex the municipal security, the broader the range of information the dealer should review. Especially if the security is nonrated.
126
Oral and written grievances are considered complaints?
Only written grievances are considered Complaints
127
What is form A-13?
A completed copy of Form A-13 must accompany underwriting fee payments that are described in the MSRB rules. If the underwriting is done through a syndicate, the managing underwriter must file this form on behalf of the syndicate members. Of the choices given, the gross spread and the security's rating would not appear on Form A-13.
