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Series 10 > Chapter 5 - MSRB Rules > Flashcards

Chapter 5 - MSRB Rules Flashcards

1
Q

MSRB

A

rule making authority for municipal brokers and dealers, but not municipal issuers. b/d’s must register with MSRB and SEC

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2
Q

MSRB and Issuers

A

MSRB can only regulate issuers in relation to their issuing of securities.

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3
Q

Enforcing MSRB rules

A

is done by existing SROs. FINRA, Fed/FDIC, SEC

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4
Q

MSRB customer

A

anyone who needs protection. members, firms, b/d’s can be customers in certain transactions. officers, partners, firm accounts are excluded from definition.

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5
Q

MSRB Associated Person

A

Anyone engaged with any muni broker or dealer activities, must be registered. excluded are clerical.

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6
Q

MSRB Discretion

A

rep determines which securities are bought or sold. market not-held orders are allowed without discretion. POA must be on file

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7
Q

Muni Principal, Series 53

A

engaged in management, direction, or supervision of municipal securities. 7 or 52 required

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8
Q

Minimum Muni Principals

A

firms must have at least 2 muni principals, unless also belongs to FINRA or has less than 11 people assoc with muni activity, then only 1 muni principal needed.

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9
Q

Series 52, Muni Rep

A

effect, sell, trade, transact muni’s. no supervision. must become licenses within 180 days of hire

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10
Q

felony within past 10 years

A

statutory disqualification. but, DUI can be appealed if it was one-off, or rep has reformed.

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11
Q

hiring/U4

A

must verify previous 3 years history and work reputation. BD has 10 days to respond

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12
Q

leaving firm

A

MRSB u4 info must be kept on fire for 4 years

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13
Q

MSRB WSPs

A

handle complaints, monitor activity, review offices, maintain books/records, keep securities

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14
Q

MSRB prompt reviews

A

opening of accounts, each muni transaction, written complaints, solicitation correspondence, approve ads in writing before 1st use.

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15
Q

Update WSPs

A

at least annually. supervisory system can be centralized

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16
Q

gifts/pay for work

A

$100 max (6 yr records) or written approved agreement ahead of time

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17
Q

Copy of MSRB manual

A

must be in each office. able to access counts

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18
Q

MSRB account opening

A

-obtain DOB/SSN prior to opening
-independently verify identity
-rep and principal must sign
-remaining info must be obtained prior to settlement of 1st transaction

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19
Q

MSRB arbitration disclosure

A

not required, but if used must have notify customer is giving up right to sue, final and binding, w/ out explanation, panel will have minority of professionals. customer must sign acknowledgement

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20
Q

MSRB suitability

A

reasonable basis and info for rec must be on file. includes recs to hold. does not apply to general investment info.

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21
Q

MSRB customer directed unsuitable trades

A

rep must explain to the client it is unsuitable. if client still wants to do it, rep must follow customers instruction

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22
Q

MSRB review discretionary orders

A

must be reviewed promptly (by EOD) & accounts must be reviewed frequently.

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23
Q

MSRB employee of another firm opens account

A

employer must give written notice prior to opening. includes spouses and minor children. will send dup confirms and follow any other employer instructions

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24
Q

MSRB agency order ticket

A

acct number and type, terms of order, date/time, price, date of execution, if CXLed and if DISC.

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25
Q

MSRB principal order ticket

A

acct number and type, terms of order, date/time, price.

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26
Q

MSRB Time of Trade disclosure

A

must disclose all material facts prior to effecting any transaction. can be done orally or in writing. cannot simply refer customer to EMMA.

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27
Q

VRDO disclosure

A

rates reset weekly & can be put back to dealer

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28
Q

ARS disclosure

A

rates reset weekly (through auction) but cannot be put back to dealer

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29
Q

discount bond disclosure

A

the discount is treated as taxable interest income

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30
Q

MSRB trade confirms

A

must be delivered at or prior to completion of transaction. just about everything must be disclosed. rating doesnt need to be, unless “not rated”

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31
Q

MSRB price quotes

A

can be quoted in dollars or yield. if yield, must compute dollars.

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32
Q

MSRB discount/premium

A

-discount bonds are likely to be held to maturity (quote using maturity date) YTM
-premium bonds are likely to be called (quote using next in-whole call) YTC

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33
Q

bonds at par & variable rate

A

only dollar price is shown

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34
Q

Letter of Credit

A

if a bank has extended credit to an issuer, they must be disclosed as a creditor.

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35
Q

put bonds

A

must be disclosed to customer. yields are not calc by put as it is up to the customer to exercise

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36
Q

customer request for more info

A

for a confirm, firm must respond within 5 business days. if request is over 30 days later, firm has 15 days

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37
Q

MSRB cannot guarantee against loss, but

A

-can enter into repo agreement
-can rec put options to hedge losses

38
Q

MSRB sharing in accont

A

cannot do it unless:
-written agreement & proportionate to capital
-joint account with family

39
Q

MSRB control relationship disclosures

A

must be made verbally before trade and in writing on confirmation
cannot purchase in discretionary account unless it is unsolicited.

40
Q

MSRB pricing

A

must be fair and reasonable
must be determined by market value, not inventory cost (unless illiquid market)
wide variance in price for same security on same day is red flag

41
Q

MSRB if not active market

A

dealer must still determine market value typically via similar issues, BW, and underlying fundamentals

42
Q

MSRB “stuffing”

A

similar to selling dividends - cannot sell muni’s just before put/call

43
Q

MSRB account transfers

A

clearing agency can handle OR
-validate in one day by carrying firm
-freeze account once validated
-has 3 business days to transfer

44
Q

MSRB customer complaints

A

-written statement alleging a grievance
-must be handle by principal
-record kept for 6 years with supervisor signature

45
Q

MSRB EMMA

A

muni prices for retail use, has:
-new issue docs
-pre-refund info
-on-going disclosures about issuers
-real time pries
-educational info

46
Q

MSRB bona fide quote

A

firm, cannot back away except if market moves. then must provide new firm quote. old, “stale” quotes are prohibited

47
Q

MSRB quoting unowned securities

A

is permissible, but firm has to honor quote.
BW/OW, nominal, and subject quotes are allowed, but need to be described as such

48
Q

MSRB secondary market joint account

A

dealers join together to market a block of bonds in secondary market - must only have one published quote.

49
Q

MSRB Broker’s Broker

A

Roughly 12 firms who handle large institutional orders anonymously to prevent market disruption

50
Q

Reporting false trades

A

is strictly prohibited

51
Q

MSRB RTRS

A

Real Time Reporting System, has 15 minutes to report trades. Feeds into EMMA

52
Q

MSRB ownership info discovered

A

usually as agent or fiduciary for an issuer, firm is not allowed to use info for anything other than intended purpose

53
Q

MSRB Anti-Reciprocal Rule

A

Cannot pick clearing broker based on highest buyer of shares. must be by: execution capability, research capability, any other financial services capability

54
Q

MSRB Settlement

A

Regular Way - 2 days
Cash - Same day

55
Q

MSRB WAII

A

when settlement is finally decided (by the Uniform Practice Code Committee), it must be at least 2 business days away

56
Q

MSRB Good Delivery

A

ticket, CUSIP, proper denomination, proper form of bond.
cannot be partial or mutilated.
if bond is called, must be disclosed

57
Q

MSRB Assignments

A

securities endorsed on the back by owner. Name must match exactly unless company name. must be medallion guaranteed

58
Q

MSRB bond deliveries “good”

A

to be good must have legal opinion attached, or be “ex-legal”

59
Q

MSRB Interest Payment claims

A

if payment sent to wrong party
-can get money back in ten days if notified within 60 days
-can get money back in twenty days if notified after 60 days

60
Q

MSRB Negotiated Underwriting

A

used for revenue bonds - issuer selects best underwriter and negotiates price

61
Q

MSRB Competitive Bid Underwriting

A

issues are auctioned to an advisor who will sell to public

62
Q

MSRB Official Statement

A

Underwriter must believe there is reasonable basis for issue to be suitable for buyers.
Underwriter must see and evaluate OS before trying to be selected as underwriter for offering

63
Q

MSRB Official Statement DD exceptions

A

under $1M par value
denominations over $100,000 and sold to no more than 35 sophisticated investors, mature under 9 months, have put option available every 9 months

64
Q

MSRB Event notices

A

underwriters cannot accept issue to sell if the issuer does not have system in place to notify bondholders of any material events

65
Q

Agreement Among Underwriters

A

details obligations of manager and syndicate

66
Q

MSRB Spread

A

what the syndicate is paid, consist of:
management fee, underwriting fee, takedown (includes selling concession)

67
Q

MSRB Western vs Eastern syndicates

A

Western- selling group is only liable for their portion (downside is capped, but so is upside)
Eastern- selling group is liable as much as they were allocated that isn’t sold. (downside is not capped, but neither is upside)

68
Q

MSRB Good Faith Deposit

A

Everyone bidding puts in a 1 or 2% deposit. funds return if they dont win the bid

69
Q

MSRB Syndicate Release Letter

A

prices bonds were purchased at, reoffering items, if/when it will be advertised.

70
Q

MSRB Priority for Orders

A

Pre-Sale (goes to all selling groups), Group Net (goes to all groups but are not pre-sold), Designated (manager can reward certain syndicate members, but increases risk of not being sold), Manager Takedown (typically small amounts, if any to ensure public is adequately dispersed)

71
Q

MSRB Identity Disclosure

A

Required for group orders so manager can decide who gets it. Not require for pre-sale, designated, manager because that is already taken care of.

72
Q

MSRB Gross Spread

A

Total must be disclosed to customer, but breakdown of spread does not need to be disclosed.

73
Q

MSRB Fraudulent activities

A

-didnt disclose financial interest
-represented as “firm commitment” when it isnt
-best efforts deposits are not put in escrow
-syndicate shorting unsuccessful issue

74
Q

MSRB Political Contributions

A

cannot do business if contribution made in past 2 years by MFP (follows person to other firms)
de minimis exemption for $250
if MFP signs check for $500 - doesnt matter if it is from joint acct, they will not get de minimis exception

75
Q

MSRB MFP

A

deal with issuers, not “natural persons”

76
Q

MSRB Advertising

A

Any material designed for public media. internal memo’s excluded. seminars, speeches included. OS/circulars excluded (because legal counsel) but summaries included.

77
Q

MSRB Secondary Market Ads

A

yields/prices must be “as of” date.
percentages must be nominal or yield
cannot only say current yield or emphasize current yield

78
Q

MSRB 529 Ads

A

Essentially same as Mutual Fund ads

79
Q

MSRB 1st Use Ad Approval

A

Must be approved by 53 or 24 before first use. All approvals must be kept on file for 4 years (unlike 3 for FINRA)

80
Q

MSRB 6 year records

A

Customer forms, statements, and complaints
Records of gifts, gratuities, and political contributions

81
Q

MSRB 4 year records

A

Agency and Principal Transactions (order tickets)
Customer Trade Confirms
Ad/Sales Lit
U4 forms

82
Q

MSRB doesnt need to be on confirm

A

taxable equivalent yield (cause this depends on customers specific tax situation)

83
Q

MSRB suitability muni’s

A

depends on tax status, clients financial background, investment objective, etc. But, amount of premium or discount does not matter.

84
Q

MSRB G-37 donating but unable to vote

A

strictly prohibited. no de minimis

85
Q

MSRB G-7

A

10 yrs employment history
5 yrs residence
but principal personally verify past 3 years employment (record who was spoken to)

86
Q

MSRB The primary source for revenue bonds must…

A

be disclosed on the trade confirm

87
Q

Listed bonds are not available for…

A

portfolio margining - they already have low margins

88
Q

MSRB agency trade confirm

A

must have name of other party in trade, or available upon written request

89
Q

Stabilizing bids can be entered for…

A

the life of the syndicate (as long as it appears in prospectus)

90
Q

MSRB if bond is a premium then price calc’d to

A

nearest in whole call

91
Q

MSRB if bond is a discount the price calc’d to

A

maturity date

92
Q

MSRB order priority provisions

A

must be furnished to customers upon request

Series 10 (5 decks)

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