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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
MSRB principal order ticket
acct number and type, terms of order, date/time, price.
26
MSRB Time of Trade disclosure
must disclose all material facts prior to effecting any transaction. can be done orally or in writing. cannot simply refer customer to EMMA.
27
VRDO disclosure
rates reset weekly & can be put back to dealer
28
ARS disclosure
rates reset weekly (through auction) but cannot be put back to dealer
29
discount bond disclosure
the discount is treated as taxable interest income
30
MSRB trade confirms
must be delivered at or prior to completion of transaction. just about everything must be disclosed. rating doesnt need to be, unless "not rated"
31
MSRB price quotes
can be quoted in dollars or yield. if yield, must compute dollars.
32
MSRB discount/premium
-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
33
bonds at par & variable rate
only dollar price is shown
34
Letter of Credit
if a bank has extended credit to an issuer, they must be disclosed as a creditor.
35
put bonds
must be disclosed to customer. yields are not calc by put as it is up to the customer to exercise
36
customer request for more info
for a confirm, firm must respond within 5 business days. if request is over 30 days later, firm has 15 days
37
MSRB cannot guarantee against loss, but
-can enter into repo agreement -can rec put options to hedge losses
38
MSRB sharing in accont
cannot do it unless: -written agreement & proportionate to capital -joint account with family
39
MSRB control relationship disclosures
must be made verbally before trade and in writing on confirmation cannot purchase in discretionary account unless it is unsolicited.
40
MSRB pricing
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
MSRB if not active market
dealer must still determine market value typically via similar issues, BW, and underlying fundamentals
42
MSRB "stuffing"
similar to selling dividends - cannot sell muni's just before put/call
43
MSRB account transfers
clearing agency can handle OR -validate in one day by carrying firm -freeze account once validated -has 3 business days to transfer
44
MSRB customer complaints
-written statement alleging a grievance -must be handle by principal -record kept for 6 years with supervisor signature
45
MSRB EMMA
muni prices for retail use, has: -new issue docs -pre-refund info -on-going disclosures about issuers -real time pries -educational info
46
MSRB bona fide quote
firm, cannot back away except if market moves. then must provide new firm quote. old, "stale" quotes are prohibited
47
MSRB quoting unowned securities
is permissible, but firm has to honor quote. BW/OW, nominal, and subject quotes are allowed, but need to be described as such
48
MSRB secondary market joint account
dealers join together to market a block of bonds in secondary market - must only have one published quote.
49
MSRB Broker's Broker
Roughly 12 firms who handle large institutional orders anonymously to prevent market disruption
50
Reporting false trades
is strictly prohibited
51
MSRB RTRS
Real Time Reporting System, has 15 minutes to report trades. Feeds into EMMA
52
MSRB ownership info discovered
usually as agent or fiduciary for an issuer, firm is not allowed to use info for anything other than intended purpose
53
MSRB Anti-Reciprocal Rule
Cannot pick clearing broker based on highest buyer of shares. must be by: execution capability, research capability, any other financial services capability
54
MSRB Settlement
Regular Way - 2 days Cash - Same day
55
MSRB WAII
when settlement is finally decided (by the Uniform Practice Code Committee), it must be at least 2 business days away
56
MSRB Good Delivery
ticket, CUSIP, proper denomination, proper form of bond. cannot be partial or mutilated. if bond is called, must be disclosed
57
MSRB Assignments
securities endorsed on the back by owner. Name must match exactly unless company name. must be medallion guaranteed
58
MSRB bond deliveries "good"
to be good must have legal opinion attached, or be "ex-legal"
59
MSRB Interest Payment claims
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
MSRB Negotiated Underwriting
used for revenue bonds - issuer selects best underwriter and negotiates price
61
MSRB Competitive Bid Underwriting
issues are auctioned to an advisor who will sell to public
62
MSRB Official Statement
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
MSRB Official Statement DD exceptions
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
MSRB Event notices
underwriters cannot accept issue to sell if the issuer does not have system in place to notify bondholders of any material events
65
Agreement Among Underwriters
details obligations of manager and syndicate
66
MSRB Spread
what the syndicate is paid, consist of: management fee, underwriting fee, takedown (includes selling concession)
67
MSRB Western vs Eastern syndicates
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
MSRB Good Faith Deposit
Everyone bidding puts in a 1 or 2% deposit. funds return if they dont win the bid
69
MSRB Syndicate Release Letter
prices bonds were purchased at, reoffering items, if/when it will be advertised.
70
MSRB Priority for Orders
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
MSRB Identity Disclosure
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
MSRB Gross Spread
Total must be disclosed to customer, but breakdown of spread does not need to be disclosed.
73
MSRB Fraudulent activities
-didnt disclose financial interest -represented as "firm commitment" when it isnt -best efforts deposits are not put in escrow -syndicate shorting unsuccessful issue
74
MSRB Political Contributions
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
MSRB MFP
deal with issuers, not "natural persons"
76
MSRB Advertising
Any material designed for public media. internal memo's excluded. seminars, speeches included. OS/circulars excluded (because legal counsel) but summaries included.
77
MSRB Secondary Market Ads
yields/prices must be "as of" date. percentages must be nominal or yield cannot only say current yield or emphasize current yield
78
MSRB 529 Ads
Essentially same as Mutual Fund ads
79
MSRB 1st Use Ad Approval
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
MSRB 6 year records
Customer forms, statements, and complaints Records of gifts, gratuities, and political contributions
81
MSRB 4 year records
Agency and Principal Transactions (order tickets) Customer Trade Confirms Ad/Sales Lit U4 forms
82
MSRB doesnt need to be on confirm
taxable equivalent yield (cause this depends on customers specific tax situation)
83
MSRB suitability muni's
depends on tax status, clients financial background, investment objective, etc. But, amount of premium or discount does not matter.
84
MSRB G-37 donating but unable to vote
strictly prohibited. no de minimis
85
MSRB G-7
10 yrs employment history 5 yrs residence but principal personally verify past 3 years employment (record who was spoken to)
86
MSRB The primary source for revenue bonds must...
be disclosed on the trade confirm
87
Listed bonds are not available for...
portfolio margining - they already have low margins
88
MSRB agency trade confirm
must have name of other party in trade, or available upon written request
89
Stabilizing bids can be entered for...
the life of the syndicate (as long as it appears in prospectus)
90
MSRB if bond is a premium then price calc'd to
nearest in whole call
91
MSRB if bond is a discount the price calc'd to
maturity date
92
MSRB order priority provisions
must be furnished to customers upon request

Series 10 (5 decks)

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