test 2

Question 1

If securities purchased in a negotiated municipal offering are sold, each of the following must be disclosed on customer confirmations

Answer 1

underwriting spread
fees earned by syndicate
initial offering price of each maturity
name of lead underwriter need not be disclosed

Question 2

where do notices of sale appear

Answer 2

bond buyer

Question 3

529 advisory activities require

Answer 3

REGISTRATION as an adviser with the msrb

Question 4

A new 20-year municipal GO bond issue is brought to market. The dated date is July 1, 2015. The maturity date is July 1, 2035. The coupon rate is 3%. The spread is 2½ points. The takedown is par less 2 points. The concession is 1¼ points. A $4 change in price would result in a five basis point change in yield. If a particular block of the bonds is sold to yield 3.40%, which of the following is TRUE?

Answer 4

The underwriting spread is 2½ points or $25. The takedown is 2 points or $20. The bond is sold to yield 3.4%, which is 40 basis points higher than the 3% coupon. The fact is stated that 5 basis points in yield is the result of a $4 change in price; therefore, 40 basis points must have resulted from a dollar price change of $32 (40 basis points divided by 5 basis points equals 8 times $4). The bonds, therefore, must have been sold for $32 less than par, or $968. The syndicate members made 2 points of $20; the manager made 2½ or $25. The bonds must have been purchased for $7 less than the 2½ point spread; in other words, at a discount of $32 versus the $25 spread.

Question 5

hen the purchaser wants to initiate a closeout of a seller who has not delivered, the purchaser may notify the seller of his intention

Answer 5

no earlier than five business days after settlement date

T+5

Question 6

Which of the following terms is synonymous with the term “syndicate”?

Answer 6

Joint account

Question 7

To determine the purchaser’s complete cost, it is necessary to know

Answer 7

dated date
coupon rate
maturity date
yield
accrued interest which requires settlement date

Question 8

at the request of an elected official of an issuer, a municipal securities dealer made a donation to the official’s favorite charity
what happens

Answer 8

This activity bars the dealer from underwriting or conducting any municipal securities business with the issuer.
This donation must be reported on Form G-37.
The practice of donating funds to an official’s favorite charity is not prohibited under G-37.

Question 9

Customer account ledgers must be posted

Answer 9

no later than settlement date.

Question 10

confirmations

markup principal transactions

Answer 10

The amount of markup or markdown must be fair and reasonable but is not required to be disclosed on a confirmation of a municipal bond transaction.

Question 11

Securities Exchange Act of 1934

Answer 11

It regulates the securities exchanges.
It requires the registration of broker/dealers.
It prohibits inequitable and unfair trade practices.
It regulates over-the-counter markets.

Question 12

who pays the underwriting assessment and files

G-32

Answer 12

The underwriting assessments and Form G-32 are filed only by the lead underwriter.

Question 13

Municipal Firm A clears through Firm B on an omnibus basis. Who must maintain records of activity

Answer 13

Both Firm A and Firm B.When one firm clears through another firm, on an omnibus basis, the beneficial parties of any transaction are not disclosed to the clearing firm. If a question asks who maintains records of the customer’s basic account information, only the introducing firm would maintain such records, since only the introducing firm knows the beneficial parties. Both firms, however, must maintain records of activity.

Question 14

securities counts and MSRB requirements

Answer 14

Rule G-8 requires that records show all long security count differences and short count differences classified by the date of physical count and verification on which they were discovered. The Board has no rule requiring periodic securities counts. However, if counts are made, all count differences must be noted. SEC rule 17a-13 does however requires municipal securities dealers, other than bank dealers and certain securities firms exempted from the rule, to examine and count securities at least once in each quarter.

Question 15

MSRB Rule G-37 prohibits municipal finance professionals from using what to solicit attendance at fund raising events

Answer 15

MSRB Rule G-37 prohibits municipal finance professionals from using either their homes or offices to solicit attendance at a fund-raising event for a political candidate. Charitable contributions are not prohibited by the MSRB’s pay-to-play rules; solicitation of political contributions, however, is prohibited.

Question 16

If a dealer executes an open market buy-in at a price different from the contract price how are gains and losses handled.

Answer 16

Any loss as the result of a buy-in plus the accrued interest differential is payable to the purchasing dealer (i.e., it is borne by the seller). However, any gain is credited to the selling dealer (less the accrued interest differentia

Question 17

When would a municipal securities dealer be relieved from providing a final official statement on a municipal bond issue

Answer 17

An official statement must be provided to all customers who purchase a new issue of municipal securities at, or prior to, settlement date. On the other hand, when a new issue of municipal securities is being sold to another broker or dealer, it is only necessary to furnish an official statement upon the request of that firm.

Question 18

Request for trade info

time frames

Answer 18

Under G-15, if a customer requests information on a trade that occurred within the past 30 days, you must respond within five business days. If the request relates to a trade that occurred more than 30 days ago, you have 15 business days to respond.

Question 19

debenture

Answer 19

a long-term security yielding a fixed rate of interest, issued by a company and secured against assets.

Question 20

Municipal Accounts Defined

Answer 20

Municipal customers are accounts for parties who are not associated with the municipal dealer or accounts that are associated with only primary transaction for the benefit of the issuer.

Question 21

New account form for an institutional client

Answer 21

The tax status is not required

the broker’s signature, suitability information, and a taxpayer ID are all required.

Question 22

Transactions which have been compared and agreed upon by both parties but which have not been completed must be closed out or canceled by the parties, no later than how many days after settlement

Answer 22

10 calendar days

Question 23

A pre-refunded municipal bond must be quoted

Answer 23

yield-to-call.
when a bond has been called or it is certain that the bond will be called, such as in a pre-refunded bond, you must quote the customer the reality of the situation.

Question 24

MSRB Underwriting Assessment Rule A-13

Answer 24

a new issue must file Form A-13 and the copy of the front page of the official statement. Underwriters must pay the MSRB an underwriting fee based upon a percentage of the par value of any new issue that has an aggregate par value of $1 million or more, and which has a final stated maturity of not less than two years. This payment must be made not later than 30 days after settlement with the issuer. Even if a new issue has a total par value of less than $1 million, Form A-13 must be filed to establish that indeed the issue is exempt from an underwriting assessment

Question 25

municipal bonds

Hypothecation

Answer 25

Municipal bonds may be hypothecated in a margin account.

Question 26

When a municipal securities dealer decides to leave the business

Answer 26

the firm must promptly notify the MSRB. There is no minimum time required to notify customers or requirement that accounts be transferred to other municipal dealers (though that is typically done).

Question 27

In selling to a customer municipal securities that are below the minimum denomination

Answer 27

Customers must be made aware of the liquidity risk in purchasing below the minimum unless the customer has other securities from the issue that can be combined to reach the minimum denomination at or before the completion of the transaction.
You must

inform the customer that the quantity of securities being sold is below the minimum denomination for the issue and that this may adversely affect the liquidity of the position.

Question 28

529 break points

Answer 28

Breakpoints may be reached by aggregating existing investments with the amount contributed to a 529 savings plan. The investor will receive a lower sales charge. 529 plans cover K-12 education.

Question 29

A registered security certificate is in good delivery form for a deceased person only if:

Answer 29

a power of substitution is executed by the executor of the estate.