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Series 53 > Chapter 1 Federal Regulations > Flashcards

Chapter 1 Federal Regulations Flashcards

1
Q

What is the primary rulemaking authority for the municipal securities industry?

A

Municipal Securities Rulemaking Board (MSRB)

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2
Q

What does the Securities Act of 1933 require from issuers?

A

Register securities with the SEC and distribute a prospectus

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3
Q

What must be disclosed to investors in the prospectus according to the Securities Act of 1933?

A

All material facts

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4
Q

Are municipal and U.S. government securities exempt from the registration and prospectus requirements of the Securities Act of 1933?

A

Yes

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5
Q

What rules are municipal and U.S. government securities still bound by despite being exempt from registration?

A

Antifraud rules of the Securities Act of 1933 and all federal securities laws

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6
Q

Fill in the blank: The purpose of this study manual is to detail the information needed to prepare for the _______.

A

Series 53 Examination

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7
Q

True or False: The Municipal Securities Rulemaking Board (MSRB) has no enforcement authority.

A

False

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8
Q

What was lacking in the municipal securities market before the Securities Acts Amendments of 1975?

A

Specific rules and regulations governing the activities of municipal securities market professionals

The market was largely unregulated, and firms engaged solely in municipal securities business were not required to register with the SEC.

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9
Q

What prompted Congress to consider legislation for the municipal securities market?

A

A combination of fraud actions against municipal securities professionals and the expansion of the municipal securities market

Increased personal income and inflation pushed more investors into higher income tax brackets, leading them to seek tax-exempt municipal securities.

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10
Q

What significant legislation was passed in 1975 to regulate the municipal securities market?

A

The Securities Acts Amendments of 1975

This Act amended the Securities Exchange Act of 1934, adding section 15B.

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11
Q

What requirement did the Securities Acts Amendments of 1975 impose on dealers in municipal securities transactions?

A

Dealers were required to be registered with the SEC

This was a key regulation introduced to protect investors.

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12
Q

What organization was created by the Securities Acts Amendments of 1975?

A

The Municipal Securities Rulemaking Board (MSRB)

The MSRB was established to function as an independent, self-regulatory organization for the municipal securities industry.

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13
Q

When was the MSRB formally established?

A

September 5, 1975

This was marked by the SEC’s appointment of its 15 initial members.

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14
Q

What areas does the representation on the MSRB cover?

A

Banks, securities firms, and public members

This diverse representation is crucial for effective governance of the municipal securities industry.

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15
Q

How many members currently make up the MSRB?

A

21 members

The board must include 11 independent members and 10 who may be associated with a municipal securities broker-dealer.

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16
Q

What types of fees does the MSRB levy to defray its costs?

A

The MSRB levies the following fees:
* An initial fee
* An annual fee
* A fee based on the volume of new issue underwritings
* A technology fee
* An assessment based on municipal securities transactions in the secondary market

These fees are essential for the operational and administrative costs of the MSRB.

17
Q

What is the MSRB?

A

Municipal Securities Rulemaking Board

The MSRB is responsible for regulating municipal securities activities.

18
Q

Who does the MSRB have authority to regulate?

A

Banks and securities firms

The MSRB’s rules do not apply to municipal security issuers or investors.

19
Q

What are the primary areas of MSRB rulemaking authority as specified by the Securities Acts Amendments of 1975?

A

Fraud prevention, fair trade principles, investor protection

These areas are aimed at protecting investors and the public interest.

20
Q

What are some examples of the MSRB’s rulemaking authority over dealer activity?

A
  • Standards of professional qualification
  • Fair practice
  • Recordkeeping
  • Compliance examinations
  • Form and content of quotations
  • Confirmation, clearance, and settlement of transactions

These rules help maintain order and transparency in municipal securities transactions.

21
Q

Can the MSRB require issuers to furnish information to investors?

A

No

The MSRB is specifically prohibited from requiring such information but can require dealers to provide generally available documents.

22
Q

What is the first step in the MSRB’s rulemaking procedure?

A

Issuing rule proposals in exposure draft form

This step includes a public comment period of up to 60 days.

23
Q

What happens after the MSRB issues rule proposals?

A

They are filed with the SEC and federal bank regulatory agencies for review

Proposals are also published in the Federal Register for further comments.

24
Q

Who enforces the rules created by the MSRB?

A

Existing securities and bank regulators

The SEC and FINRA primarily enforce MSRB rules for securities firms.

25
Q

True or False: The MSRB enforces its own rules.

A

False

The enforcement is handled by other regulatory bodies.

26
Q

Which regulatory agency enforces MSRB rules for national banks?

A

Comptroller of the Currency

27
Q

What agency is responsible for enforcing MSRB rules for nonnational banks that are members of the Federal Reserve?

A

Federal Reserve Board

28
Q

Which agency enforces MSRB rules for nonnational banks that are not members of the Federal Reserve System?

A

Federal Deposit Insurance Corporation

29
Q

What types of municipal securities activities are governed by MSRB rules for banks?

A

Activities conducted on a dealer basis

30
Q

True or False: MSRB rules cover municipal securities transactions conducted by banks as fiduciaries.

A

False

31
Q

What is the frequency of compliance examinations for municipal securities broker-dealers?

A

At least once every four calendar years

32
Q

What does MSRB stand for?

A

Municipal Securities Rulemaking Board

33
Q

Fill in the blank: The activities of _________ are subject to MSRB oversight.

A

municipal advisors

34
Q

What is the purpose of the interpretive letters and notices released by the MSRB?

A

To provide important rule interpretations

35
Q

Which authority typically conducts examinations for municipal securities broker-dealers?

A

FINRA, Comptroller of the Currency, FRB, or FDIC

36
Q

What is a key aspect of preparing for the Series 53 Examination related to recordkeeping?

A

Retention requirements for books and records

37
Q

What type of municipal securities activities are not covered by MSRB rules?

A

Transactions conducted as a fiduciary or on an agency basis

38
Q

True or False: The MSRB directly enforces its rules.

A

False

39
Q

What is the relationship between the MSRB and the municipal securities activities of securities firms?

A

Subject to MSRB rules regardless of dealer or broker basis

Series 53 (2 decks)

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