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Series 7 > The Issuance of Municipal Securities and MSRB Rules > Flashcards

The Issuance of Municipal Securities and MSRB Rules Flashcards

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Series 7 Top-off Exam flashcards
1
Q

The total takedown is made up of ____________ + _____________.

A

The total takedown is made up of Additional takedown + Sales concession.

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2
Q

What yield would be disclosed for a bond purchased at a premium and callable at a premium?

A

The lower of the YTM or YTC

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3
Q

Is it mandatory for a municipal issuer to prepare an Official Statement?

A

No, but if one has been prepared, the MSRB requires BDs to distribute it.

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4
Q

True or False: A recall provision notifies clients that the time period on an out-firm bond quote has been shortened.

A

True

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5
Q

______________ is the return of municipal bonds that were originally accepted for delivery.

A

Reclamation is the return of municipal bonds that were originally accepted for delivery.

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6
Q

At bid submission, does Net Interest Cost (NIC) or True Interest Cost (TIC) take into account the time value of money?

A

True Interest Cost (TIC), also called the Canadian Method

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7
Q

What is created when a BD employee has influence over the debt service of an issuer (e.g., an employee is a mayor)?

A

Control relationship

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8
Q

Those qualified as municipal RRs (Series 52) may sell, trade, or underwrite municipals, but may not ____________ sales.

A

Those qualified as municipal RRs (Series 52) may sell, trade, or underwrite municipals, but may not supervise sales.

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9
Q

What orders benefit the entire syndicate by percentage of liability?

A

Group net orders

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10
Q

____________ orders are given to a syndicate and identify two or more members (not all) to receive credit for the sale.

A

Designated orders are given to a syndicate and identify two or more members (not all) to receive credit for the sale.

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11
Q

What advertises that municipal bonds are available and invites underwriters to bid on a new competitive issue?

A

Notice of Sale

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12
Q

Is an official statement or preliminary official statement considered retail communication?

A

No. However, a summary or abstract of an official statement is considered retail communication.

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13
Q

Is a $300 political contribution from a joint checking account a violation if the check is only signed by the MFP?

A

Yes. To avoid a violation, the check must be signed by both owners.

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14
Q

Are BDs who violate the political contribution rule banned from obtaining competitive underwriting deals from issuers?

A

No, since the deal is obtained on the merits of the bid.

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15
Q

What yield would always be disclosed for a bond that has been prerefunded?

A

YTC

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16
Q

Who enforces MSRB rules?

A

BD Enforcement: SEC or FINRA and Bank Dealer Enforcement: FRB, FDIC, or the Comptroller of the Currency

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17
Q

What’s stated in a municipal indenture (bond resolution)? 3

A
  1. Issuer’s responsibilities,
  2. Bondholders’ rights, and
  3. The different covenants (pledges) made to protect bondholders
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18
Q

When do municipal bond trades settle?

A

3 business days after the trade date (T+3)

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19
Q

If a BD wants to sell municipal bonds and have significant exposure to different bids, who should it contact?

A

A Broker’s Broker

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20
Q

Political contribution rules allow MFPs who may vote for a candidate to contribute a maximum of $_____ (per election).

A

Political contribution rules allow MFPs who may vote for a candidate to contribute a maximum of $250 (per election).

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21
Q

For municipal registered bonds, what factors determine good delivery?

A

Proper assignment and the bonds denominated from $1,000 to $100,000 in $1,000 increments

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22
Q

A political contribution made from a joint checking account may exceed $250 if signed by ___________.

A

A political contribution made from a joint checking account may exceed $250 if signed by both owners.

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23
Q

What type of syndicate has members responsible only for their specific allocation - Eastern or Western?

A

Western or Divided syndicate

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24
Q

How is the underwriter determined for a Competitive Sale?

A

The issuer invites syndicates to bid on the issue, with the best bid (lowest interest cost) winning the competition.

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25
Q

True or False: Disclosure is not needed if a control relationship exists and bonds are placed in discretionary accounts.

A

False. To place those bonds in the client’s account, specific written customer authorization is required.

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26
Q

If a control relationship exists, how may the relationship be disclosed?

A

Orally, before a trade, and then in writing, at or before settlement

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27
Q

Series ____ or Series _____ will qualify an individual to sell municipal securities.

A

Series 7 or Series 52 will qualify an individual to sell municipal securities.

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28
Q

Name the three components of the spread for a bond offering.

A
  1. Manager’s fee 2. Additional takedown 3. Sales concession
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29
Q

If a bid is unsuccessful, when must the manager return the syndicate member’s portion of the good-faith deposit?

A

Within 2 business days of its return from the issuer

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30
Q

When will a cash trade for a municipal bond settle?

A

Same day

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31
Q

Is the average credit rating of the 11 GO Bond Index higher or lower than the 20 GO Bond Index?

A

Higher; the average is AA+/Aa1.

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32
Q

What is the appropriate registration designation to supervise the municipal activity for a BD?

A

Municipal Securities Principal (Series 53)

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33
Q

Where can Visible Supply figures and the Placement Ratio for municipals be found?

A

The Bond Buyer

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34
Q

What is a municipal indenture or bond resolution?

A

The contract between the issuer and the bondholders

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35
Q

Do S&P and AM Best insure municipal bonds?

A

No, they provide bond ratings.

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36
Q

Serial bonds are quoted on a ___________________ basis.

A

Serial bonds are quoted on a yield-to-maturity basis.

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37
Q

A BD that is a part of the selling group (not a syndicate member) would only be entitled to the ____________________.

A

A BD that is a part of the selling group (not a syndicate member) would only be entitled to the sales concession.

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38
Q

What is the penalty for political contributions that violate the rule?

A

A two-year ban on obtaining negotiated underwriting business from the issuer

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39
Q

When must customer confirmations be sent?

A

By the completion of the transaction (usually the settlement date)

40
Q

Is the Placement Ratio compiled daily or weekly?

A

Weekly

41
Q

How is the underwriter determined for a Negotiated Sale?

A

The issuer selects the underwriter it would like to work with, and they negotiate the offering terms.

42
Q

Does the MSRB have the authority to enforce its own rules?

A

No. The MSRB has no enforcement authority.

43
Q

The ___________________ has the authority to change the priority of orders.

A

The syndicate manager has the authority to change the priority of orders.

44
Q

Who supervises a firm’s municipal activities and provides account approval, transaction review, and complaint handling?

A

Municipal Securities Principal (Series 53)

45
Q

What is the purpose of a Tombstone Ad?

A

It calls attention to the new issuance of securities and members of the syndicate.

46
Q

The average rating for the 20 GO Bond Index is ____________.

A

The average rating for the 20 GO Bond Index is AA or Aa2.

47
Q

The 20 GO Bond Index is composed of ____ GO bonds with ____-year maturities.

A

The 20 GO Bond Index is composed of 20 GO bonds with 20-year maturities.

48
Q

True or False: The 11 GO Bond Index is composed of 11 of the 20 bonds in the 20 GO Bond Index.

A

True

49
Q

What would a member of the syndicate (not the manager) earn for selling bonds?

A

The total takedown

50
Q

For a municipal bond to be considered good delivery, is a Legal Opinion mandatory?

A

Yes. A Legal Opinion must be imprinted or attached (unless identified as ex-legal).

51
Q

What type of syndicate is formed when members retain a level of liability until all bonds are sold - Eastern or Western?

A

Eastern or Undivided syndicate

52
Q

True or False: The Syndicate Letter is also referred to as the Agreement Among Underwriters.

A

True

53
Q

_________ orders are those in which only one member earns the total takedown.

A

Member orders are those in which only one member earns the total takedown.

54
Q

Is the average credit rating of the Revenue Bond Index higher or lower than the GO Bond Indexes?

A

Lower; the average is A+/A1.

55
Q

What does the Placement Ratio indicate?

A

The number of bonds that were sold during the week compared to what was available for sale (the demand side)

56
Q

True or False: Syndicate managers may change the priority of orders if justifiable and in the syndicate’s best interest.

A

True

57
Q

The document underwriters submit to issuers when bidding on a competitive issue is called the ______________________.

A

The document underwriters submit to issuers when bidding on a competitive issue is called the Official Bid Form.

58
Q

True or False: MSRB rules regulate the municipal activities of BDs, banks, and the employees of these institutions.

A

True. The MSRB also regulates municipal advertising.

59
Q

What relationship is created when a BD receives a fee for giving advice to a municipality regarding a new issue?

A

Financial Advisory relationship

60
Q

True or False: MBIA, FGIC, and AMBAC protect customers against broker-dealer bankruptcy.

A

False. MBIA, FGIC, and AMBAC insure municipal bond offerings, while SIPC protects against broker-dealer bankruptcy.

61
Q

What yield would be disclosed for a bond purchased at a premium and callable at par?

A

Yield to call (YTC)

62
Q

List the priority of orders from first to fourth.

A
  1. Presale orders 2. Group net orders 3. Designated orders 4. Member orders
63
Q

For municipal bearer bonds, what factors determine good delivery?

A

All unpaid coupons attached and the bonds denominated in $1,000 or $5,000 increments

64
Q

What is the spread minus the manager’s fee?

A

The total takedown

65
Q

What orders are placed prior to the actual awarding of the issue to the syndicate?

A

Presale orders

66
Q

True or False: Term bonds are quoted on a yield basis.

A

False. Term bonds are quoted on a dollar basis (% of par).

67
Q

$_____ is the MSRB gift rule limitation.

A

$100 is the MSRB gift rule limitation (same as FINRA).

68
Q

Which bond would most likely require a feasibility study to be issued?

A

Revenue Bond

69
Q

If a bond counsel has no concerns related to the new offering, the counsel may render an ______________ opinion.

A

If a bond counsel has no concerns related to the new offering, the counsel may render an unqualified opinion.

70
Q

Are Visible Supply figures compiled daily or weekly?

A

Daily

71
Q

Where can Notices of Sale be found?

A

In The Bond Buyer (The Daily Newspaper of Public Finance)

72
Q

True or False: A broker’s broker deals with other BDs, but does not deal with the public or underwrite new issues.

A

True

73
Q

The Visible Supply figure indicates the number of municipals expected to reach the market within the next ____ days.

A

The Visible Supply figure indicates the number of municipals expected to reach the market within the next 30 days.

74
Q

What yield would be disclosed for a bond purchased at a discount?

A

Yield to maturity (YTM)

75
Q

True or False: The MSRB has no authority or control over municipal issuers.

A

True

76
Q

A B/D has a financial advisory relationship with an issuer. May it underwrite the issuer’s bonds on a negotiated basis?

A

No. Rule G-23 bans an advisor from acting as an underwriter for the same issuer on a negotiated or competitive basis.

77
Q

What information would the manager of a municipal underwriting provide in the Syndicate Letter? 4

A
  1. Underwriting type (negotiated/competitive),
  2. amount, allocation,
  3. priority of orders,
  4. type of account (eastern/western)
78
Q

The index showing the average yield on 25 revenue bonds with 30-year maturities is called the ______________________.

A

The index showing the average yield on 25 revenue bonds with 30 year maturities is called the Revenue Bond Index.

79
Q

True or False: Municipal securities representatives may sell municipal bond funds.

A

False. Municipal representatives may only sell individual municipal bonds.

80
Q

When a municipal dealer gives a firm quote for a specific period (e.g., 1 hour), the bonds are considered ___________.

A

When a municipal dealer gives a firm quote for a specific period (e.g., 1 hour), the bonds are considered out firm.

81
Q

What is the disclosure document, similar to a prospectus, that is used for municipal bonds?

A

Official Statement

82
Q

Why will the manager prioritize orders for the purchase of bonds sold through the syndicate?

A

To give the maximum benefit to the entire syndicate as a group versus any one particular member

83
Q

What is the document that establishes the agreement between the issuer and the underwriter?

A

Underwriting Agreement

84
Q

Political contribution rules allow MFPs NOT able to vote for a candidate to contribute a max. of $___ (per election).

A

Political contribution rules allow MFPs NOT able to vote for a candidate to contribute a max. of $0 (per election).

85
Q

____________ is the buyer’s refusal to accept the delivery of municipal bonds.

A

Rejection is the buyer’s refusal to accept the delivery of municipal bonds.

86
Q

List some of the information to be included on a municipal customer confirmation.

A

Description, price and yield (lower of YTM or YTC), BD capacity (commission for agency), trade and settlement dates

87
Q

Put the following four types of orders in the correct priority: Group Net, Member, Presale, Designated

A

1) Presale 2) Group Net 3) Designated 4) Member (Remember: P, G, D, M)

88
Q

What type of opinion will a bond counsel render if the legality of the issue is in question or a lawsuit is pending?

A

Qualified

89
Q

Who is responsible for the formulation and interpretation of rules for the municipal industry?

A

The MSRB

90
Q

A B/D has a financial advisory relationship with an issuer. May it underwrite the issuer’s bonds on a competitive basis?

A

No. Rule G-23 bans an advisor from acting as an underwriter for the same issuer on a negotiated or competitive basis.

91
Q

When bidding on a new issue, what will underwriters first determine?

A

Reoffering Yield

92
Q

______________________ bonds would most likely require voter approval.

A

General Obligation (GO) bonds would most likely require voter approval.

93
Q

Who is the associated person who primarily engages in or supervises municipal securities business?

A

Municipal Finance Professional (MFP)

94
Q

What is the difference between what the syndicate pays the issuer for the new issue and the public offering price?

A

The underwriting spread

95
Q

True or False: The legal opinion addresses the creditworthiness of an issue.

A

False. Legal opinions address the legality (authority/validity) of the issue and the tax exemption of the interest.

96
Q

COP

A

Certificate of Participation

Like a revenue bond version of a GO Bond

  • Rev from lease payments, no voter approval, not subject to debt limits
  • lower rating than other similar GO bonds

Series 7 (24 decks)

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