Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Series 7 > Chapter 12 > Flashcards

Chapter 12 Flashcards

You may prefer our related Brainscape-certified flashcards:
Series 7 Top-off Exam flashcards
1
Q

True or False: Term bonds are quoted on a yield basis.

A

False. Term bonds are quoted on a dollar basis (% of par).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Serial bonds are quoted on a ___________________ basis.

A

yield-to-maturity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

True or False: MBIA, FGIC, and AMBAC protect customers against broker-dealer bankruptcy.

A

False. MBIA, FGIC, and AMBAC insure municipal bond offerings, while SIPC protects against broker-dealer bankruptcy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Do S&P and AM Best insure municipal bonds?

A

No, they provide bond ratings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What type of syndicate has members responsible only for their specific allocation - Eastern or Western?

A

Western or Divided

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What type of syndicate is formed when members retain a level of liability until all bonds are sold - Eastern or Western?

A

Eastern or Undivided

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

______________________ bonds would most likely require voter approval.

A

GO - General Obligation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Which bond would most likely require a feasibility study to be issued?

A

Revenue Bonds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

How is the underwriter determined for a Negotiated Sale?

A

Issuer choice

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How is the underwriter determined for a Competitive Sale?

A

Goes to bid

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What advertises that municipal bonds are available and invites underwriters to bid on a new competitive issue?

A

Notice of Sale

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Where can Notices of Sale be found?

A

The Bond Buyer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

The document underwriters submit to issuers when bidding on a competitive issue is called the ______________________.

A

Official Bid Form

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

When bidding on a new issue, what will underwriters first determine?

A

Reoffering Yield

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

At bid submission, does Net Interest Cost (NIC) or True Interest Cost (TIC) take into account the time value of money?

A

True Interest Cost (TIC), also called the Canadian Method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

True or False: The legal opinion addresses the creditworthiness of an issue.

A

False. Legal opinions address the legality (authority/validity) of the issue and the tax exemption of the interest.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

If a bond counsel has no concerns related to the new offering, the counsel may render an ______________ opinion.

A

unqualified

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What type of opinion will a bond counsel render if the legality of the issue is in question or a lawsuit is pending?

A

Qualified

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is the difference between what the syndicate pays the issuer for the new issue and the public offering price?

A

The underwriting spread

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Name the three components of the spread for a bond offering.

A
  1. Manager’s fee 2. Additional takedown 3. Sales concession
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is the spread minus the manager’s fee?

A

The total takedown

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

The total takedown is made up of ____________ + _____________.

A

Additional takedown and sales concession

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What would a member of the syndicate (not the manager) earn for selling bonds?

A

The total takedown

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

A BD that is a part of the selling group (not a syndicate member) would only be entitled to the ____________________.

A

Sales concession

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Why will the manager prioritize orders for the purchase of bonds sold through the syndicate?

A

To give the maximum benefit to the entire syndicate as a group versus any one particular member

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

List the priority of orders from first to fourth.

A
  1. Presale orders 2. Group net orders 3. Designated orders 4. Member orders
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What orders are placed prior to the actual awarding of the issue to the syndicate?

A

Presale Orders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

_________ orders are those in which only one member earns the total takedown.

A

Member Orders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What orders benefit the entire syndicate by percentage of liability?

A

Group Net Orders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

____________ orders are given to a syndicate and identify two or more members (not all) to receive credit for the sale.

A

Designated Orders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

What is the disclosure document, similar to a prospectus, that is used for municipal bonds?

A

Official Statement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Is it mandatory for a municipal issuer to prepare an Official Statement?

A

No, but if one has been prepared, the MSRB requires BDs to distribute it.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

True or False: MSRB rules regulate the municipal activities of BDs, banks, and the employees of these institutions.

A

True. Also regulates advertising

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

What is the purpose of a Tombstone Ad?

A

It calls attention to the new issuance of securities and members of the syndicate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Who is responsible for the formulation and interpretation of rules for the municipal industry?

A

MSRB

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Does the MSRB have the authority to enforce its own rules?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

Who enforces MSRB rules?

A

BD Enforcement: SEC or FINRA

Bank Dealer Enforcement: FRB, FDIC, or the Comptroller of the Currency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Those qualified as municipal RRs (Series 52) may sell, trade, or underwrite municipals, but may not ____________ sales.

A

Supervise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

What is the appropriate registration designation to supervise the municipal activity for a BD?

A

Series 53. Municipal Securities Principal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

Before dealing with the public, municipal securities representatives must serve a ____ day apprenticeship period.

A

90 day

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

Series ____ or Series _____ will qualify an individual to sell municipal securities.

A

Series 7 or Series 52

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

What are the limitations while serving the MSRB’s apprenticeship period?

A

No dealing with customers (only with other municipal professionals) and no commissions (only straight salary)

43
Q

True or False: Municipal securities representatives may sell municipal bond funds.

A

False, may only sell individual bonds

44
Q

What is the document that establishes the agreement between the issuer and the underwriter?

A

Underwriting Agreement

45
Q

If a bid is unsuccessful, when must the manager return the syndicate member’s portion of the good-faith deposit?

A

Within 2 business days

46
Q

True or False: A broker’s broker deals with other BDs, but does not deal with the public or underwrite new issues.

A

True

47
Q

If a BD wants to sell municipal bonds and have significant exposure to different bids, who should it contact?

A

A Broker’s broker

48
Q

Where can Visible Supply figures and the Placement Ratio for municipals be found?

A

The Bond Buyer

49
Q

Are Visible Supply figures compiled daily or weekly?

A

Daily

50
Q

Is the Placement Ratio compiled daily or weekly?

A

Weekly

51
Q

The Visible Supply figure indicates the number of municipals expected to reach the market within the next ____ days.

A

30 days

52
Q

True or False: The Visible Supply figure will only include municipal bonds.

A

False. The Visible Supply figure shows municipal bonds or notes being offered on a negotiated or competitive basis.

53
Q

What does the Placement Ratio indicate?

A

The number of bonds that were sold during the week compared to what was available for sale (the demand side)

54
Q

The 20 GO Bond Index is composed of ____ GO bonds with ____-year maturities.

A

20 GO bonds with 20 year maturities

55
Q

The average rating for the 20 GO Bond Index is ____________.

A

AA or Aa2

56
Q

True or False: The 11 GO Bond Index is composed of 11 of the 20 bonds in the 20 GO Bond Index.

A

True

57
Q

Is the average credit rating of the 11 GO Bond Index higher or lower than the 20 GO Bond Index?

A

Higher. AAA+ or Aa1

58
Q

The index showing the average yield on 25 revenue bonds with 30-year maturities is called the ______________________.

A

Revenue Bond Index

59
Q

Is the average credit rating of the Revenue Bond Index higher or lower than the GO Bond Indexes?

A

Lower. A+ or A1

60
Q

When do municipal bond trades settle?

A

T + 3

61
Q

When will a cash trade for a municipal bond settle?

A

Same day

62
Q

For a municipal bond to be considered good delivery, is a Legal Opinion mandatory?

A

Yes

63
Q

For municipal bearer bonds, what factors determine good delivery?

A

All unpaid coupons attached and the bonds denominated in $1,000 or $5,000 increments

64
Q

For municipal registered bonds, what factors determine good delivery?

A

Proper assignment and the bonds denominated from $1,000 to $100,000 in $1,000 increments

65
Q

____________ is the buyer’s refusal to accept the delivery of municipal bonds.

A

Rejection

66
Q

______________ is the return of municipal bonds that were originally accepted for delivery.

A

Reclamation

67
Q

List some of the information to be included on a municipal customer confirmation.

A

Description, price and yield (lower of YTM or YTC), BD capacity (commission for agency), trade and settlement dates

68
Q

When must customer confirmations be sent?

A

By the completion of the transaction

69
Q

What yield would be disclosed for a bond purchased at a discount?

A

Yield to Maturity (YTM)

70
Q

What yield would be disclosed for a bond purchased at a premium and callable at par?

A

Yield to Call (YTC)

71
Q

What yield would be disclosed for a bond purchased at a premium and callable at a premium?

A

The lower of the YTM or YTC

72
Q

What yield would always be disclosed for a bond that has been prerefunded?

A

YTC

73
Q

What is created when a BD employee has influence over the debt service of an issuer (e.g., an employee is a mayor)?

A

Control Relationship

74
Q

If a control relationship exists, how may the relationship be disclosed?

A

Orally, before a trade, and then in writing, at or before settlement

75
Q

True or False: Disclosure is not needed if a control relationship exists and bonds are placed in discretionary accounts.

A

False, specific written customer authorization is needed

76
Q

Who supervises a firm’s municipal activities and provides account approval, transaction review, and complaint handling?

A

Municipal Securities Principal (Series 53)

77
Q

$_____ is the MSRB gift rule limitation.

A

$100

78
Q

Is an official statement or preliminary official statement considered advertising?

A

No, but a summary abstract would be.

79
Q

What relationship is created when a BD receives a fee for giving advice to a municipality regarding a new issue?

A

Financial Advisory Relationship

80
Q

What’s required of BDs with a financial advisory relationship with an issuer to bid for the issuer’s competitive sale?

A

Obtain the issuer’s written permission

81
Q

What’s required of BDs with a financial advisory relationship with an issuer to engage in the issuer’s negotiated sale?

A

1) Terminate relationship 2) Disclose conflict and anticipated comp. to issuer 3) Disclose relationship to customers

82
Q

Does a BD acting in a financial advisory capacity need to refund advisory fees upon becoming the issuer’s underwriter?

A

No

83
Q

Put the following four types of orders in the correct priority: Group Net, Member, Presale, Designated

A

Presale, Group Net, Designated, Member

84
Q

The ___________________ has the authority to change the priority of orders.

A

Syndicate Manager

85
Q

True or False: Syndicate managers may change the priority of orders if justifiable and in the syndicate’s best interest.

A

True

86
Q

Who is the associated person who primarily engages in or supervises municipal securities business?

A

Municipal Finance Professional (MFP)

87
Q

Political contribution rules allow MFPs who may vote for a candidate to contribute a maximum of $_____ (per election).

A

$250

88
Q

Political contribution rules allow MFPs NOT able to vote for a candidate to contribute a max. of $___ (per election).

A

$0

89
Q

What is the penalty for political contributions that violate the rule?

A

A two-year ban on obtaining negotiated underwriting business from the issuer

90
Q

Are BDs who violate the political contribution rule banned from obtaining competitive underwriting deals from issuers?

A

No, since the deal is obtained on the merits of the bid.

91
Q

True or False: The MSRB has no authority or control over municipal issuers.

A

True

92
Q

What is a municipal indenture or bond resolution?

A

The contract between the issuer and the bondholders

93
Q

What’s stated in a municipal indenture (bond resolution)?

A

Issuer’s responsibilities, bondholders’ rights, and the different covenants (pledges) made to protect bondholders

94
Q

When a municipal dealer gives a firm quote for a specific period (e.g., 1 hour), the bonds are considered ___________.

A

out firm

95
Q

True or False: A recall provision notifies clients that the time period on an out-firm bond quote has been shortened.

A

True

96
Q

What information would the manager of a municipal underwriting provide in the Syndicate Letter?

A

Underwriting type (negotiated/competitive), amount, allocation, priority of orders, type of account (eastern/western)

97
Q

What will a firm establish between departments to restrict the flow of potential insider information?

A

Information Barriers; China Walls

98
Q

What must be implemented to limit the flow of communication between research and investment banking departments?

A

Information Barriers

99
Q

A BD is ready to issue a favorable research report. What must exist for the BD to continue regular trading operations?

A

Effective information barriers must be in place.

100
Q

A BD is ready to issue a favorable research report. Information barriers must exist between what two departments?

A

Research and Trading

101
Q

What is the purpose of an information barrier between trading and research departments?

A

To prevent the trading department from learning of an impending report about a stock in which the firm has a position

102
Q

True or False: The Syndicate Letter is also referred to as the Agreement Among Underwriters.

A

True

103
Q

A political contribution made from a joint checking account may exceed $250 if signed by ___________.

A

both owners

104
Q

Is a $300 political contribution from a joint checking account a violation if the check is only signed by the MFP?

A

Yes

Series 7 (25 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions