Chapter 3: Municipal Securities Rules And Regulations

Question 1

Securities act of 1975

Answer 1

Established Municipal Securities Ranking Board

MSRB governs issue and trade of municipal securities

Has no ability to enforce the rules it makes as FINRA enforces

Office of Comptroller of Currency enforces rules that apply to banks

Federal Reserve Board enforces MSRB rules regarding nonnational banks in Fed Reserve System

FDIC enforces those not in Fed System

Question 2

Municipal Finance Professional

Answer 2

Municipal Security Sales outside of retail or who solicits municipal security business for broker dealer or in supervisory chain above MFP

Question 3

Three categories of MSRB rules

Answer 3

1. Rules in regards to trading
2. Administrative towards MSRB
3. General Rules and Regulations

Question 4

Rule G-1

Answer 4

A bank with a separatly identifiable department related to munis is classified as a dealer

May be identifiable if it provides any research or advisory services regarding munis

Question 5

Rule G-2 and G-3

Answer 5

Must pass series 52 or series 7 to be qualified as a munis rep

To qualify as a principal must pass the 53

Question 6

Rule G-6

Answer 6

Municipal broker/dealers must maintain blanket fidelity bonds

Question 7

Rule G-7

Answer 7

Must keep file of associated persons.

Most info on U-4, 5 forms

Question 8

Rule G-10

Answer 8

Must file complaints and deliver a copy to Investor Brochure to customer

Question 9

G-11

Answer 9

Syndicate must identify priority for allocation and ID conditions that might alter that order

Question 10

G-12

Answer 10

Uniform practices of settling transactions

Cash trades settle on trade date
Reg on third business day after trade date

Also discusses good delivery requirements

Mutilated certificates must be validated

Called securities are not good delivery

Question 11

G-13

Answer 11

Can publish quotations only for bona Fide bids.

Nominal only allowed if identified

Question 12

G-15

Answer 12

Transaction confirmation must be given at or before transaction completion

Question 13

G-16

Answer 13

Each broker dealer must be examined at least 2 times each year

Appropriate enforcement agency’s do this not MSRB

Question 14

G-17 and 18

Answer 14

Must deal fairly

Reasonable and fair pricing

Question 15

19 and 20

Answer 15

19- suitable recommendation must be made

20- no gifts over $100 in a year, payment for services rendered are allowed

Question 16

21 and 22

Answer 16

21- must be truthful in advertising

22- clients must be informed of control relationship, special care must be taken with a discretionary account

Question 17

23-24

Answer 17

23- Prohibits a broker dealer that serves as an FA from underwriting the bonds

24- may not use confidential info to solicit trades

Question 18

25 and 27

Answer 18

25- no misuse of funds, guarantee of profit, joint accounts in a private capacity okayyyyy

27- Principal must be designated to look over reps. Must approve:
Opening of new accounts
Every muni transaction
Action taken on customer complaints
Correspond regarding trades

Question 19

28 and 29

Answer 19

28- if an employee of a muni security dealer opens an account with another muni dealer, the firm opening the account must notify the other

29- must keep a copy of MSRB rules

Question 20

30 and 31

Answer 20

30- mark up and mark down must be reasonable

31- must not solicit based on record of sales of the investments company’s share

Question 21

32 and 33

Answer 21

32- Official statement must be shipped, along with spread info unless it’s a negotiated underwriting

33- 360 day year with 30 day months for calculating accrued interest

Question 22

37-39

Answer 22

37- prohibits engaging in Municipals for 2 years after political contribution for negotiated underwriting

MFPs are allowed up to $250

Rule 39- may not call between 8am or after 9pm in called person time zone. Does not apply when established customer.

Question 23

41 and 42

Answer 23

41- anti money laundering compliance

42- limit political contributions

Question 24

Electronic Municipal Market

Answer 24

EMMA

Key info on munis