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T or F
Delivery of a municipal certificate may not be rejected for missing a CUSIP number
A municipal principal approves all orders for the accounts of:
Principals must approve "all" orders.
Ownership is transferred when a customer sells a book-entry municipal security:[A]By providing certificates to the clearing agent.[B]By instructing the appropriate clearing agency to transfer ownership from one customer to another[C]By journal-entry from the seller to the buyer on your firm's books[D]By instructing the transfer agent to issue a new certificate
Book-entry securities do not have issued certificates, so we know A and D are not correct. A journal entry would not be sufficient because the buyer and seller may not have accounts with the same firm, and, more importantly, because the transfer agent must ascertain all aspects of the trade are legitimate (no stop transfer legends, etc.).
Since bearer bonds are not registered in the investor's name, the signature of the holder is not required.
Factors affecting the amount of profit a municipal securities dealer acting as a principal may realize, under MSRB Rules, include all of the following EXCEPT:[A]The total dollar amount involved in the transaction[B]Securities that were traded or exchanged in connection with the trade[C]A five percent markup policy[D]Those expenses involved in effecting the transaction
The 5% mark-up policy is an NASD policy for OTC securities transactions - NOT municipal securities.
All municipal securities transactions must be approved by a municipal securities principal of the firm.
A principal of a municipal securities firm must, according to MSRB Rules, give written approval of:
I. Each municipal securities transaction.
II. The handling of written customer complaints.
III. Correspondence involving solicitation.
All of these options require written approval by a municipal securities principal.
All securities are subject to the anti-fraud provisions of the Federal Securities Acts. Municipal securities are not required to file an official statement under the Securities Act of 1933. Original Issue Discount (OID) securities accrete the discount so there is no capital gain if the security is held to maturity.
Of the transactions listed, those involving a control relationship would require authorization by the client on a per transaction basis, even when the client has given the firm discretionary authority. MSRB Rules make this authorization by the client a requirement when such a relationship exists.
A municipal securities dealer is prohibited under MSRB rules from giving business related gratuities to any one donee in excess of what amount per year?[A]$25.[B]$100.[C]$500.[D]$1,000.
The Municipal Securities Rulemaking Board (MSRB) limits business-related gifts and gratuities from municipal securities dealers to $100 per year per donee.
Under MSRB Rules, which of the following must be given to a customer purchasing a new issue of municipal securities?
II and IV would have to be given to the customer. I and III would not.
When opening an account for an employee of another Municipal Securities Dealer, the dealer opening the account must provide notification to the employing dealer that the account is being opened, must follow any instructions regarding the account from the employing dealer, and must send duplicate copies regarding all transactions in the account to the employing firm. The dealer where the account is held does NOT have to receive approval from the employing firm for each transaction entered.
Guaranteeing a customer against loss is illegal. B, C, and D all attempt to do this. Guaranteeing a customer that his order will be executed in a timely manner is not only legal, but also expected
Upon opening a discretionary account for a customer, MSRB rules require that a registered representative obtain which of the following at or before settlement of the first transaction?
To open a discretionary account prior written authorization is needed from the customer and approval is required from a principal of the firm.
MSRB Rules concerning gifts and gratuities to a client would permit which of the following?[A]$1,500 in cash[B]A weekly gift of $75[C]An all expense paid two-week trip to Bermuda[D]Dinner and a hockey game
The maximum gift or gratuity is limited to $100 per person, per year.
All of the following may be considered when determining a fair commission on an agency transaction in municipal securities, EXCEPT:[A]Cost of services rendered[B]Expenses of execution[C]Value of the dealer's inventory[D]Other compensation connected with the transaction
Inventory costs are part of the risk of being a dealer and may not be taken into consideration when determining commission - the bonds must be traded at the current market value - not inventory cost.
It is legal to immediately reoffer bonds purchased but it is not legal to over charge the next buyer.
Eg: Purchased @ 100
Reoffer @ 101 = 1 pt. mark-up = OK
Reoffer @ 105.5 = 5.5 pt. mark-up = excessive
Reoffer at 6.1 = 90 basis pt. mark-up (7% - 6.1%) = excessive
Reoffer at 6.8 = 20 basis pt. mark-up (7% - 6.8%) = OK
The only thing a broker/dealer can do is guarantee timely execution of customer orders, the three other choices would illegal.
Under MSRB rules, the apprentice may not execute any transactions for the public.
Registration with the SEC does not mean approval. It means that the SEC received from the dealer certain background organizational information.
In each of the answers listed, a scenario is presented where an employee of immediate family member of an employee at a municipal securities dealer is opening an account other than the client who owns stock in another dealer. In situations where an employee of a member firm or an immediate family member of an employee of a member firm wish to open an account, special procuedures must be followed. Normal procedures can be followed when opening the account of the stockholder.
Statements which are true concerning the MSRB Code of Arbitration are that it:
The MSRB Code of Arbitration can only be invoked against a non-municipal securities professional if there is an arbitration agreement. The code applies to municipal securities disputes only. It does parallel the arbitration code of FINRA and does not apply if both parties agree to settle the dispute in court.
All Muni transactions must be reviewed and approved by a Municipal Securities Principal.
Under MSRB Rules, whenthe firm receives a complaint they must make a note of the complaint and the action taken.
Any individual hired to sell municipal securities must be licensed prior to filling any orders.
Although the usual denomination of municipal bonds is $5,000, the minimum denomination is $1,000.
If a municipal securities representative placed buy and sell orders on behalf of a customer that were excessive in size or frequency, it would be considered:[A]Short selling[B]Swapping[C]Churning[D]Exciting
Excessive trading in size and/or frequency could constitute "churning" - which is illegal.
Before they can be used for the first time for promotional or advertising purposes, a municipal or general securities principal must approve, according to MSRB Rules, which of the following?
A Municipal or General Securities Principal must approve all of these prior to their use.
Which of the following would a registered representative normally obtain from a customer when determining if municipal securities are a suitable investment for that customer:
All of these are important when determining whether or not municipal securities are suitable investments for a customer.
The confirmation is the tool used to describe a transaction.
According to MSRB Rules, gifts are allowed if they do not exceed $100.
An official statement is like a prospectus and is considered to be a disclosure document, not an advertisement.
First Wisconsin, a municipal securities dealer, has been asked to open an account for Mrs. Johnson. Mrs. Johnson's husband is employed by Virginia Securities Corp. which is also a municipal securities dealer. According to MSRB Rules, First Wisconsin[A]Is not permitted to open an account for Mrs. Johnson.[B]May open an account for Mrs. Johnson but must give written notice to Virginia Securities Corp.[C]May open an account for Mrs. Johnson but must notify the MSRB.[D]May open an account for Mrs. Johnson so long as the usual papers required for opening any account are obtained.
When one broker/dealer is going to open an account for a person (or member of their immediate family) employed by another broker/dealer, written notice must be sent to the employer.
A municipal dealer is immediately reoffering some 7% bonds it has just purchased at par. Which of the following quotes would indicate prices nearest the recent purchase at par and, therefore, most likely to be considered bona fide quotes under MSRB Rules?
The yield of 6.8% would be nearest 7%, and the price of 101-1/8 would be closest to par, therefore representing the most bona fide quote. The price of 108-1/8 is too much of a mark-up, and would be a net yield of 4.95%
Under MSRB rules, additional requirements must be met when opening an account for any person who is an employee of a municipal dealer, or any person who is in the immediate family of an employee of a municipal dealer.
A senior partner of a securities firm is also the chairman of the board of a corporation that is the direct obligor of an issue of municipal industrial revenue bonds. Under MSRB rules, this relationship is referred to as:[A]a control relationship[B]an arms length relationship[C]a financial advisory relationship[D]a discretionary account relationship
A person who in a position to influence a firm's management decisions is referred to as an affiliated person or a control person and the relationship is referred to as a control relationship. Control relationships must always be disclosed to customers.
When one dealer is selling bonds to an employee of another dealer, prior approval is not required under MSRB rules, but the sending of duplicate confirmations would be required.
All choices must be included on customer confirmations.
Maximum gift is $100 per person per year.
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