Municipal Securities Flashcards

Question

What is the Allocation of orders❓

Answer 1

✅ An MSRB rule in which syndicate members must establish a list for fulfilling orders, based on priority. This is documented within the syndicate agreement, all members must agree. - Presale Orders- orders placed during cooldown period. - Syndicate (group-net) orders - orders received by syndicate members that are credited to the group so all members' profit. - Designated orders - orders in which the buyer specifies which syndicate member will profit - Members orders - left over orders that were not picked up by buyers go to syndicate members. MSRB = (Municipal Securities Rulemaking Board)

Answer 2

Typically, are federal exempt (not taxed by the fed), they are usually municipal tax exempt too if purchased in the same state. If not, they may be taxed on the municipal level. Ex: You can buy California bonds and live in Philly, the city will tax you

Answer 3

✅ date in which the bids are submitted to the issuer (Competitive offering) or the date in which the syndicate members sign the contract (Negotiated offering). Either way the lead Underwriter sends a commitment wire to all syndicate members to inform of what is happening.

Answer 4

✅ The date preceding the date of sale

Answer 5

✅ The period established by the syndicate leader in which syndicate members may solicit customers.

Answer 6

✅ The period beginning when the first order is submitted to the syndicate or when the securities are first purchased from the issuer, whichever happens first. This time period ends when the issuer sells all securities or when the issuer delivers the final securities to syndicate members, whichever happens last.

Answer 7

✅ Bonds that are backed by more than one tax type, instead of being backed by just property taxes (ad valorem), these bonds may also be backed with sales taxes on Alcohol, Fuel, Tobacco, business licenses, etc. Ex - Las Vegas has a special tax on hotel stays of about $40 to help pay for the raiders stadium.

Answer 8

✅ Bonds backed by the properties that benefit from the improvements, not everyone in the municipality pays. These bonds are typically issued to construct sidewalks, sewers, streets, etc

Answer 9

✅ Bonds backed by both the revenue and taxes of the municipality. These bonds are a combination of both GEO and Revenue bonds. If the income from the project is not enough, the taxes will be used to pay the debt. ○ Examples include toll bridges, toll roads, water and sewer facilities, etc. ○ Backed by Fees first, then the full faith and credit of the municipality (taxes)

Answer 10

✅ This is a type of GEO bond that is backed by the taxes in a municipality up to a limit. The limit is based on the revenue of the municipality that is not already used to back other bonds. ○ If the bond is deemed Unlimited, the taxpayer's property taxes may be raised to cover. § Good for bond holders § Bad for homeowners

Answer 11

✅ Are bonds issued to build low-income housing, they are also known as new housing authority bonds (NHAs). These bonds are considered to be the safest due to being backed by the US Government.

Answer 12

✅ Bonds issued by a local municipality that are backed by a pledge from the state. These bonds require legislature approval and are considered safe. The state has a moral, not legal, obligation to pay off the debt.

Answer 13

✅ Taxable bonds that were created under the 2009 Build America Back program that ended in 2010 in which municipalities can tax certain bonds and turn around to use those taxes to fund local infrastructure. Such as tunnels, bridges, roads, etc. These come in two flavors ○ Tax Credit BABs - Investors receive tax credits equal to 35% of the coupon rate. ○ Direct payment BABs - Municipality receives reimbursement in the form of treasury payments at 35% of the coupon rate. These have higher coupon rates and are more desirable.

Answer 14

✅ Tax Anticipation Notes, these notes provide financing to cover projects backed by ad valorem (property taxes) that they are yet to be collected.

Answer 15

✅ Revenue Anticipation Notes, these notes provide financing to cover projects backed by revenue that is yet to be collected from a revenue producing project.

Answer 16

✅ Tax and Revenue Anticipation Notes, these notes are a combination of TANs and RANs. They fund projects that are waiting to collect taxes and revenue.

Answer 17

✅ Grant Anticipation Notes, these notes provide financing while waiting for grants from the US Gov. The notes are paid off when the grant is received.

Answer 18

✅ Bond Anticipation Notes, these notes provide short term financing while the municipality works to issue out long-term Bonds.

Answer 19

✅ Construction Loan Notes, these notes provide financing for construction projects and are typically paid for by the money received from issuing long term bonds.

Answer 20

✅ Notes issued by organizations such as Universities with approval from the government. These are short term notes lasting no more than 270 days and are issued to help the organization cover short term liabilities.

Answer 21

✅ Notes with a variable rate and a put option allowing the holder to redeem the notes at the stated value. Allowed to redeem once or twice a week.

Answer 22

✅ non-debt municipal fund securities are investment vehicles issued by states or municipalities that are not bonds (no interest payments or repayment of principal like typical debt). Instead, they are pooled investment funds used to help investors save for specific goals with tax advantages - Issued by states or municipalities - Registered under the Municipal Securities Rulemaking Board (MSRB) rules - Tax-advantaged for qualifying use - Can be sold through broker-dealers or direct-sold programs Examples include 529 College savings plans, ABLE plans, and LGIPs.

Answer 23

Definitions ✅ Also known as QTPs (qualified tuition plans) are specialized education savings accounts meant to cover higher education expenses such as; college, post-secondary trade and vocational school, and post graduate programs Qualified individuals ✅ One owner (usually parent), One beneficiary (child) Contributions ✅ - Made with after tax dollars (like a roth) - limits vary by state - no income limits are imposed on investors - Contributions are used to acquire units that are invested along the same strategy in the state trust the funds are held. - Contributions remain in control of the owner even after the child turns 18 Distributions ✅ - Distributions are tax free if it falls under the list of qualified distributions for educational purposes. (Tuition fees, books, lab fees, etc) Features ✅ - Clients must receive an official offer called an 'offering circular' before the account can be opened - Can be setup as a prepaid tuition plan - Investments may be Aggressive, Moderate, Conservative - Funds not used because the beneficiary is no longer going to school may be transferred to an immediate family member like a parent, child, or sibling.

Answer 24

Definitions - ✅ - Designated for people with provable disabilities and their families. These accounts are designed to help pay for the added expenses incurred by taking care of a disabled person such as; transportation, educational, health, assistive technology, legal fees, etc. Qualified individuals - ✅ One owner (usually parent), One beneficiary (child) Contributions -✅ - Made with after tax dollars (like a roth) - Contributions can be made by anyone - limits vary by state - Many states have annual contribution caps and maximum account balances Distributions - ✅ - Distributions are tax free if used for qualified disability expenses Features - ✅ - To be eligible, the onset of the disability must have been discovered before the individual turned 26 - Investments may be Aggressive, Moderate, Conservative - Individuals can qualify for this account type even while being on government sponsored programs like Medicaid, disability, etc

Answer 25

Definitions - ✅ - Designated investments setup by a state for local gov entities (city, county, district) Qualified individuals - ✅ - Local government entities Contributions -✅ - Are then invested into short term pooled investments considered safe Distributions - ✅ - NA Features - ✅ - No prospectus - LGIPs sold directly to municipalities by authorized advisors or dealers

Answer 26

✅ Formula used to compare municipal and corporate bonds equally. Use this formula to find the taxable equivalent of a municipal bond. (Muni bonds are fed tax free, this formula spits a percentage assuming they weren’t) - TEY = municipal yield/100% - investors tax bracket - Ex - BOB is 32% tax bracket and wants to know the TEY for a municipal GO bond paying 5% ○ 5%/100% - 32% § 5%/68% □ 7.35% Taxable equivalent

Answer 27

✅ Formula used to compare corporate bonds to municipal (tax free) bonds. This formula shows you what the yield would be for a corp bond if it was "tax free." . - MEY = municipal yield x 100% - investors tax bracket - Ex - Bob is in a 32% tax bracket and wants to know the MEY for a federal bond paying 6% ○ 6% x 100% - 32% § 6% x 68% □ 4.08% Non-Taxable equivalent

Answer 28

✅ Bonds not taxed by US GOV, State, or local levels.

Answer 29

✅ Municipalities include - Puerto Rico - Guam - US Virgin Islands - American Samoa - Washington DC - Additionally municipal bonds bought in your own state are typically triple tax free.