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1

Administration and Registration
Question ID: 48986
Which of the following information is not required on Form A-13?

I. Managing underwriter's name.
II. Participations of syndicate members.
III. Gross spread.
IV. Ratings.

A) II, III and IV.
B) I only.
C) II and III.
D) III and IV.

Answer: A

Form A-13 must accompany the transmittal of the underwriting fees. The MSRB requires the name of the managing underwriter, the issuer's name, and the total amount of the issue. This must be submitted within 30 days of the invoice date, along with the $0.03 per $1,000 underwriting assessment.

Reference: 7.1.1.4 in the License Exam Manual.

2

Administration and Registration
Question ID: 48987

In 2011, the Mt. Vernon Port Authority sold $100 million of general obligation bonds that mature in 2019 to a syndicate managed by a municipal broker/dealer. The broker/dealer must pay an underwriting fee of:

A) $0.03 per $1,000 par value of securities on behalf of the entire syndicate.
B) $0 because the manager of the syndicate is exempt from paying an underwriting fee.
C) $0.03 per $1,000 par value of securities that it is responsible to sell.
D) $0.02 per $1,000 par value of securities.

Answer: A

The managing underwriter is required to consolidate the fee due the MSRB and issue the monies no later than 30 days following the invoice date.

Reference: 7.1.1.4 in the License Exam Manual.

3

Administration and Registration
Question ID: 48988
Regarding the fees levied upon dealers that are MSRB members, which of the following statements is TRUE?

A) The initial fee is $500, and the annual fee is $500.
B) The initial fee is $100, and the annual fee is $500.
C) The initial fee is $500, and the annual fee is $100.
D) The initial fee is $100, and the annual fee is $1,000.

Answer: B

The initial fee is $100, and it is $500 for every year thereafter.

Reference: Answer: B

The MSRB requires a firm to have at least two municipal principals unless the firm is also a FINRA member, or there are ten or fewer registered representatives. If this is the case, the requirement is one principal.

Reference: 7.1.1.5 in the License Exam Manual7.1.1.4 in the License Exam Manual.

4

Administration and Registration
Question ID: 48989
How many registered municipal securities principals must a municipal securities firm with five employees have?

A) Two principals.
B) Three principals.
C) None, if a designated employee is qualified as a general securities principal.
D) One principal.

Answer: D

The MSRB requires a firm to have at least two municipal principals unless the firm is also a FINRA member, or there are ten or fewer registered representatives. If this is the case, the requirement is one principal.

Reference: 7.1.1.5 in the License Exam Manual.

5

Administration and Registration
Question ID: 49042
The MSRB imposes an initial single assessment on municipal securities dealers of:

A) $200.
B) $1,000.
C) $1,500.
D) $100.

Answer: D

The initial fee for a newly registered municipal securities dealer is $100 and the annual fee is $500.

Reference: 7.1.1.4 in the License Exam Manual.

6

Rules G-8 and G-9
Question ID: 48718
All of the following municipal records must be kept for six years EXCEPT:

A) customer complaints.
B) securities borrowed and loaned.
C) general ledger.
D) syndicate records.

Answer: B

General ledgers, records of successful syndicate operations, customer files, and customer complaints must be filed for six years. Records involving the founding of the firm and ongoing minutes must be kept for the lifetime of the firm. All other records must be kept for three years.

Reference: 7.2.2.2 in the License Exam Manual.

7

Rules G-8 and G-9
Question ID: 48796
Under MSRB rules, which of the following records must be maintained by the syndicate manager?

I. Names and participation percentages of each syndicate member.
II. Copies of the Official Statement.
III. All allotments and the price at which sold.
IV. The date and amount of any good faith deposit.

A) II and III.
B) I, II, III and IV.
C) I, III and IV.
D) I, II and III.

Answer: C

Official statements are issuer documents, so there is no MSRB rule mandating their retention. Remember, the MSRB does not regulate issuers.

Reference: 7.2.1 in the License Exam Manual.

8

Rules G-8 and G-9
Question ID: 48807
Under MSRB rules, which of the following records must be maintained by the syndicate manager?

I. Date of settlement with the issuer.
II. Date of closing the account.
III. Terms and conditions governing the operation of the syndicate.
IV. Reconciliation of profits and expenses including designated credits and miscellaneous expenses.

A) I and II.
B) I, II and IV.
C) I and III.
D) I, II, III and IV.

Answer: D

All items listed are required records that must be kept by the syndicate manager for six years.

Reference: 7.2.2.2 in the License Exam Manual.

9

Rules G-8 and G-9
Question ID: 48809
According to MSRB rules, copies of put options and repurchase agreements must be maintained by the firm:

A) for five years.
B) for six years.
C) until the option is exercised or the securities repurchased.
D) for three years.

Answer: D

These records must be kept for three years and in a readily accessible location the first two years.

Reference: 7.2.2.1 in the License Exam Manual.

10


Rules G-8 and G-9
Question ID: 48975
The City of Templeton sold $100 million of GO bonds that mature in 2010 to a syndicate managed by ABC Corp., a municipal broker/dealer. Who is responsible for maintaining the books and records for the syndicate?

A) The City of Templeton, the issuer of the bonds.
B) The MSRB.
C) ABC, the manager of the syndicate.
D) All members of the syndicate.

Answer: C

The managing underwriter is required to maintain the records of the underwriting. Each member is required to maintain a record of its transactions.

Reference: 7.2.2.2 in the License Exam Manual.

11

Rules G-8 and G-9
Question ID: 48976
All of the following statements regarding repurchase agreements are true EXCEPT:

A) records for these types of agreements are kept for three years.
B) they are usually arranged for short periods of time.
C) in the agreement, securities are sold by a firm with the intent of repurchasing them at a later date and agreed upon price.
D) the terms of the agreement do not have to be recorded if municipal securities are involved.

Answer: D

A repurchase agreement is where a person sells a security for a short period with the promise to buy it back at a later date. Records must be kept for three years.

Reference: 7.2.2.1 in the License Exam Manual.

12

Rules G-8 and G-9
Question ID: 48977
An agreement permitting an investor to sell municipal securities at a specified time and at an agreed upon price is called a:

A) syndicate.
B) negotiated deal.
C) warrant.
D) put option.

Answer: D

A put option allows the holder to sell the bonds at a specific price and time to the issuer or another party.

Reference: 7.2.2.1 in the License Exam Manual.

13

Rules G-8 and G-9
Question ID: 48978
According to MSRB rules, which of the following records must a broker/dealer preserve for at least three years?

A) Copies of confirmations sent to customers.
B) All of these.
C) Put option records.
D) Repurchase agreement records.

Answer: B

All of the records listed must be retained for three years. Customer files, the general ledger, customer account files, blotters, securities position logs, complaints, and underwriting records must be kept for six years while corporate charters and resolutions and partnership agreements must be kept for the lifetime of the firm. Official statements have no requirement; everything else must be kept for three years.

Reference: 7.2.2.1 in the License Exam Manual.

14

Rules G-8 and G-9
Question ID: 48979
When maintaining syndicate transactions records, which of the following must be preserved?

I. Settlement date with the issuer.
II. All allotments of securities and sale prices.
III. Percentage participation for each member of the syndicate.
IV. Copy of the issuer's notice of sale.

A) I and IV.
B) III only.
C) I, II and III.
D) I and III.

Answer: C

The syndicate records include the settlement date, the allotments, and the syndicate's allocation. A copy of the official notice of sale need not be retained; it is an issuer document.

Reference: 7.2.2.2 in the License Exam Manual.

15

Rules G-8 and G-9
Question ID: 48980
All records maintained by a municipal securities dealer under MSRB rules must be:

A) retained for six years.
B) maintained on either a trade date or settlement date basis.
C) maintained on a trade date basis.
D) maintained on a settlement basis.

Answer: B

The records of a broker/dealer can be maintained either on a trade date or settlement date basis, provided the broker/dealer is consistent in its postings.

Reference: 7.2.2.4 in the License Exam Manual.

16

Rules G-8 and G-9
Question ID: 48981
Subsidiary records preserved by a municipal securities dealer include:

A) municipal securities in transfer.
B) municipal securities borrowed or loaned.
C) municipal securities to be validated.
D) all of these.

Answer: D

All of the choices would be considered subsidiary records to the general ledger.

Reference: 7.2.2.1.1 in the License Exam Manual.

17

Rules G-8 and G-9
Question ID: 48982
All of the following records are maintained as subsidiary records of the general ledger. Which of those records is more commonly referred to as a fail record?

A) Municipal securities transactions not completed on settlement date.
B) Municipal securities in transfer.
C) Municipal securities to be validated.
D) Municipal securities borrowed or loaned.

Answer: A

Fail record refers to transactions that are fails to deliver (or receive) of securities; therefore, the record would reflect transactions that have not settled in a timely manner.

Reference: 7.2.2.1.1 in the License Exam Manual.

18

Rules G-8 and G-9
Question ID: 48983
According to MSRB rules, a record of all written customer complaints and any action taken in relation to the complaints must be kept by the firm:

A) complaints do not have to be preserved unless the municipal securities principal decides otherwise.
B) for six years.
C) for three years.
D) until the complaint is settled.

Answer: B

Under MSRB rules, records of written customer complaints must be maintained for six years.

Reference: 7.2.2.2 in the License Exam Manual.

19

Rules G-8 and G-9
Question ID: 48984
A customer registers a complaint with a municipal dealer alleging improper execution of the customer's order. The dealer must:

I. maintain a record of the complaint for not less than six years.
II. record what action, if any, has been taken in connection with the complaint.
III. file a copy of the complaint with the MSRB.
IV. cease trading for the customer's account until the complaint has been resolved.

A) I and III.
B) II and IV.
C) I, II, III and IV.
D) I and II.

Answer: D

Under MSRB rules, the municipal securities principal is required to oversee all written complaints, note the action taken, and maintain the complaint and resolution for no less than six years.

Reference: 7.2.2.2 in the License Exam Manual.

20

Rules G-8 and G-9
Question ID: 48985
Under MSRB rules, records of agency and principal transactions:

must be segregated from each other.
may be combined.
must be preserved for at least three years.
must be preserved for at least six years.
A) I and III.
B) I and IV.
C) II and III.
D) II and IV.

Answer: A

Records of agency and principal transactions must be segregated and retained for three years.

Reference: 7.2.2.1 in the License Exam Manual.

21

Rules G-8 and G-9
Question ID: 49082
Under MSRB Rule G-8, a dealer must maintain records relating to:

successful syndicate bids.
unsuccessful syndicate bids.
A) neither I nor II.
B) I only.
C) II only.
D) both I and II.

Answer: B

Under Rule G-8, a dealer is not required to maintain records relating to unsuccessful syndicate bids. Records relating to successful bids must be retained by the syndicate manager for six years.

Reference: 7.2.2.2 in the License Exam Manual.

22

Rule G-12
Question ID: 48680
Under MSRB rules, information on interdealer trades must be submitted to a registered clearing agency:

A) on trade date.
B) no later than T+1.
C) no later than T+2.
D) by settlement date.

Answer: A

Uniform Practice Rules of the MSRB require that information on all interdealer trades in securities with CUSIP numbers be submitted to a registered clearing agency (e.g., NSCC) for automated comparison. Both sides must report on trade date. This information is matched by computer and reported back to each side on the following business day.

Reference: 7.3 in the License Exam Manual.

23

Rule G-12
Question ID: 48689
Under MSRB rules, all of the following may be changed by mutual agreement between dealers EXCEPT:

A) settlement dates on When Issued (WI) securities.
B) buy-in procedures.
C) confirmation information.
D) close-out procedures.

Answer: C

MSRB rules do not allow alterations to required information on a confirmation.

Reference: 7.3.2.1 in the License Exam Manual.

24

Rule G-12
Question ID: 48712
Under MSRB rules, which of the following reclamations must be made within one business day?

I. Missing interest coupons.
II. Missing legal opinion.
III. Mutilated security.
IV. Stolen certificate.
A) III and IV.
B) I, II, III and IV.
C) I, II and III.
D) I and II.

Answer: C

MSRB reclamation time limits include one day for missing coupons, legal opinions, and mutilated certificates, and no time limit for stolen or counterfeit securities.

Reference: 7.3.2.4 in the License Exam Manua

25

Rule G-12
Question ID: 48799
A municipal dealer receives a confirmation for a transaction it does not recognize. After investigation, the dealer concludes that a trade occurred. Under MSRB rules, the dealer must:

A) immediately notify the confirming dealer by telephone and send a confirmation to the confirming dealer within one business day.
B) send a confirmation to the confirming dealer within one business day.
C) immediately send written notice with return receipt requested to the confirming dealer indicating recognition, and send a confirmation within one business day.
D) immediately send a confirmation to the confirming dealer.

Answer: A

After an investigation concludes a trade occurred, MSRB rules require the firm to immediately telephone the confirming dealer and send written confirmation the next business day.

Reference: 7.3.2.1 in the License Exam Manual.

26

Rule G-12
Question ID: 48810
Under MSRB rules, which of the following deliveries must be reclaimed within 18 months?

I. Wrong securities delivered.
II. Refusal of the transfer agent to accept.
III. Legal documentation missing.
IV. Mutilated coupons.

A) II and III.
B) I and II.
C) I and III.
D) I and IV.

Answer: B

Irregular deliveries and refusal of the transfer agent to accept the securities require reclamation within 18 months. Missing coupons, mutilated securities or coupons, missing legal opinions, and missing proof of insurance must all be reclaimed within one business day.

Reference: 7.3.2.4 in the License Exam Manual.

27

Rule G-12
Question ID: 48945
Confirmations for transactions between broker/dealers must include the:

I. CUSIP number of the security, if any.
II. amount of concession per $1,000 value.

A) I only.
B) II only.
C) neither I nor II.
D) both I and II.

Answer: D

Confirmations must include the CUSIP number and the concession as well as the name and amount of the securities being traded, the settlement date, and all other information pertinent to the trade.

Reference: 7.3.2.1 in the License Exam Manual.

28

Rule G-12
Question ID: 48946
The MSRB's Uniform Practice Code Rule G-12 deals with transactions between a:

I. customer and broker/dealer.
II. bank dealer and nonbank dealer.
III. customer and bank dealer.

A) I and III.
B) I, II and III.
C) II only.
D) I only.

Answer: C

The Uniform Practice Code dictates industry practices such as delivery dates and accrual of interest. These are dealer-to-dealer rules.

Reference: 7.3 in the License Exam Manual.

29

Rule G-12
Question ID: 48947
Under MSRB rules, reclamation is permitted for 1 business day following delivery when:

A) the securities go into default.
B) a coupon is discovered to be mutilated.
C) a disagreement exists as to the purchase price.
D) the CUSIP number is not imprinted on the certificates.

Answer: B

Reclamation occurs when a firm that has accepted delivery of securities it now wants to send back. They would be sent back because of bad delivery (e.g., mutilated coupons).

Reference: 7.3.2.4 in the License Exam Manual.

30

Rule G-12
Question ID: 48948
On a settlement of a municipal securities transaction between dealers, assume that the selling dealer delivers to the buying dealer securities that are contracted for, but there is a small dollar difference in the delivery price. Which of the following statements is TRUE?

A) Any money differences can cause rejection.
B) Any money differences not resolved on the settlement date can cause cancellation unless reconciliation occurs within two business days of settlement.
C) Money differences less than the maximum allowed by MSRB rules will not cause rejection and the calculation of the buyer will be used.
D) Money differences less than the maximum allowed by MSRB rules will not cause rejection and the calculation of the seller will be used.

Answer: D

Small money differences do not cause rejection of a municipal delivery. In this case, the seller's computation prevails.

Reference: 7.3.2.4 in the License Exam Manual.