Series 52
The role of the MSRB is to do all of the following, EXCEPT:
Formulate rules for the municipal securities industry
Interpret its rules for broker-dealers and dealer banks
Inspect member firms at least once each year
Enforce its rules when violations occur
I and II only
III and IV only
I, II, and III only
I, II, III, and IV - ANS-The MSRB was formed as the rulemaking body for the municipal
securities industry. It formulates and interprets rules in the areas of recordkeeping,
qualification, and business conduct. However, the MSRB does not enforce its rules or
inspect members for compliance with the rules. Enforcement and inspection is done by
the SEC and FINRA for brokerage firms and by the FRB, FDIC, and the Office of the
Comptroller of the Currency for dealer banks. Also, the MSRB does not set
commissions rates or regulate new issues (municipals are exempt from new issue
regulations).
Under MSRB rules, all of the following statements are TRUE regarding a discretionary
account, EXCEPT:
The name of the principal supervising the account must be obtained
The customer must provide written authorization to open the account
A principal must approve each transaction
The firm must keep a record of the name of the person executing each transaction -
ANS-The following information must be maintained for discretionary accounts:
The customers written authorization to allow the firm to exercise discretionary authority
Written approval of the principal who will be supervising the account
Written approval of the principal with respect to each transaction in the account
There is no requirement to keep a record of the name of the person (trader) who
executed each transaction.
T-bills purchased at the weekly auction will have a settlement date on the:
Next business day
Fifth business day
Monday following the auction
,Thursday following the auction - ANS-The auction for 13- and 26-week T-bills is held
each Monday. Settlement is on Thursday of the same week. (66841)
A municipal securities representative is permitted to make an outbound telephone call:
Between 8:30 a.m. and 12:00 p.m.
Between 9:00 p.m. and 8:00 a.m.
Between 7:00 a.m. and 7:59 a.m.
Between 9:30 p.m. and 12:00 a.m. - ANS-Under MSRB Telemarketing Rules, municipal
securities dealers are limited to prospecting or cold calling between the hours of 8:00
a.m. and 9:00 p.m. local time at the called person's location, unless prior consent has
been given by the prospect. Only choice (a) is between these two times.
Regulation T applies to:
Cash accounts
Commodity accounts
Margin accounts
Municipal bond margin accounts - ANS-Regulation T of the Federal Reserve Board
applies to cash accounts and margin accounts. Regulation T does not apply to
commodity accounts or municipal bond margin accounts. For municipal bond accounts,
industry rules require a margin deposit of 7% of the market value of the bond. Margin
requirements for commodity accounts are set by the individual commodity exchanges.
Which of the following instruments makes monthly payments?
Municipal bond
GNMA pass-through certificate
T-bond
Debenture - ANS-Interest and principal payments on GNMA pass-through certificates
are made monthly. Municipal, Treasury and corporate bonds generally make
semiannual interest payments.
Which TWO of the following choices are characteristics of GNMA pass-through
certificates?
Interest and principal payments are received monthly
The investor will receive her principal back at maturity
Timely payment of interest and principal is guaranteed by the U.S. government
Interest is subject to federal tax but exempt from state and local tax - ANS-GNMA
pass-through certificates are guaranteed by the U.S. government. Interest and principal
payments are received monthly and, therefore, the investor will receive principal
payments before, not at maturity. The interest is subject to federal, state, and local
taxes.
, A bond is issued under state constitutional power. This bond:
Is a general obligation bond
Is a revenue bond
Requires voter approval
Does not require voter approval - ANS-Bonds issued under state constitutional power
do not require a law to be passed prior to issuance. In addition, these bonds would
generally not require voter approval, but may require legislative approval.
Which of the following is a lagging economic indicator?
Employees on nonagricultural payrolls
Money supply
Index of Industrial Production
The average duration of unemployment - ANS-The average duration of unemployment
is considered a lagging indicator. Money supply is a leading indicator. Employees on
nonagricultural payrolls and the Index of Industrial Production are coincidental
indicators. (66871)
Two bonds of equal quality, with identical maturities and nominal rates, are rising in
price as interest rates fall. If one bond price stops near par while the other continues
rising to a premium, this is known as:
Convexity
Duration
Compression
Inflation - ANS-This is known as par compression and occurs when one bond resists
rising above par as interest rates decrease. This normally is the result of prepayment
risk, inherent in most mortgage-backed securities.
A syndicate formed for the purpose of purchasing and distributing a new municipal issue
that will mature in less than 24 months is a(n): - ANS-Under MSRB rules, a qualified
note syndicate is defined as a syndicate formed for the purpose of purchasing and
distributing a new municipal issue that will mature in less than 24 months. In addition,
the new issue may not be purchased by the syndicate on an all-or-none basis, and the
syndicate has stipulated that there is no order period. Only group orders will be
accepted, and the syndicate may buy or sell the securities for its own account.
A dealer is soliciting prices from other dealers in an effort to obtain execution for a
customer. This is known as a(n):
Fill-or-kill
All-or-none
The role of the MSRB is to do all of the following, EXCEPT:
Formulate rules for the municipal securities industry
Interpret its rules for broker-dealers and dealer banks
Inspect member firms at least once each year
Enforce its rules when violations occur
I and II only
III and IV only
I, II, and III only
I, II, III, and IV - ANS-The MSRB was formed as the rulemaking body for the municipal
securities industry. It formulates and interprets rules in the areas of recordkeeping,
qualification, and business conduct. However, the MSRB does not enforce its rules or
inspect members for compliance with the rules. Enforcement and inspection is done by
the SEC and FINRA for brokerage firms and by the FRB, FDIC, and the Office of the
Comptroller of the Currency for dealer banks. Also, the MSRB does not set
commissions rates or regulate new issues (municipals are exempt from new issue
regulations).
Under MSRB rules, all of the following statements are TRUE regarding a discretionary
account, EXCEPT:
The name of the principal supervising the account must be obtained
The customer must provide written authorization to open the account
A principal must approve each transaction
The firm must keep a record of the name of the person executing each transaction -
ANS-The following information must be maintained for discretionary accounts:
The customers written authorization to allow the firm to exercise discretionary authority
Written approval of the principal who will be supervising the account
Written approval of the principal with respect to each transaction in the account
There is no requirement to keep a record of the name of the person (trader) who
executed each transaction.
T-bills purchased at the weekly auction will have a settlement date on the:
Next business day
Fifth business day
Monday following the auction
,Thursday following the auction - ANS-The auction for 13- and 26-week T-bills is held
each Monday. Settlement is on Thursday of the same week. (66841)
A municipal securities representative is permitted to make an outbound telephone call:
Between 8:30 a.m. and 12:00 p.m.
Between 9:00 p.m. and 8:00 a.m.
Between 7:00 a.m. and 7:59 a.m.
Between 9:30 p.m. and 12:00 a.m. - ANS-Under MSRB Telemarketing Rules, municipal
securities dealers are limited to prospecting or cold calling between the hours of 8:00
a.m. and 9:00 p.m. local time at the called person's location, unless prior consent has
been given by the prospect. Only choice (a) is between these two times.
Regulation T applies to:
Cash accounts
Commodity accounts
Margin accounts
Municipal bond margin accounts - ANS-Regulation T of the Federal Reserve Board
applies to cash accounts and margin accounts. Regulation T does not apply to
commodity accounts or municipal bond margin accounts. For municipal bond accounts,
industry rules require a margin deposit of 7% of the market value of the bond. Margin
requirements for commodity accounts are set by the individual commodity exchanges.
Which of the following instruments makes monthly payments?
Municipal bond
GNMA pass-through certificate
T-bond
Debenture - ANS-Interest and principal payments on GNMA pass-through certificates
are made monthly. Municipal, Treasury and corporate bonds generally make
semiannual interest payments.
Which TWO of the following choices are characteristics of GNMA pass-through
certificates?
Interest and principal payments are received monthly
The investor will receive her principal back at maturity
Timely payment of interest and principal is guaranteed by the U.S. government
Interest is subject to federal tax but exempt from state and local tax - ANS-GNMA
pass-through certificates are guaranteed by the U.S. government. Interest and principal
payments are received monthly and, therefore, the investor will receive principal
payments before, not at maturity. The interest is subject to federal, state, and local
taxes.
, A bond is issued under state constitutional power. This bond:
Is a general obligation bond
Is a revenue bond
Requires voter approval
Does not require voter approval - ANS-Bonds issued under state constitutional power
do not require a law to be passed prior to issuance. In addition, these bonds would
generally not require voter approval, but may require legislative approval.
Which of the following is a lagging economic indicator?
Employees on nonagricultural payrolls
Money supply
Index of Industrial Production
The average duration of unemployment - ANS-The average duration of unemployment
is considered a lagging indicator. Money supply is a leading indicator. Employees on
nonagricultural payrolls and the Index of Industrial Production are coincidental
indicators. (66871)
Two bonds of equal quality, with identical maturities and nominal rates, are rising in
price as interest rates fall. If one bond price stops near par while the other continues
rising to a premium, this is known as:
Convexity
Duration
Compression
Inflation - ANS-This is known as par compression and occurs when one bond resists
rising above par as interest rates decrease. This normally is the result of prepayment
risk, inherent in most mortgage-backed securities.
A syndicate formed for the purpose of purchasing and distributing a new municipal issue
that will mature in less than 24 months is a(n): - ANS-Under MSRB rules, a qualified
note syndicate is defined as a syndicate formed for the purpose of purchasing and
distributing a new municipal issue that will mature in less than 24 months. In addition,
the new issue may not be purchased by the syndicate on an all-or-none basis, and the
syndicate has stipulated that there is no order period. Only group orders will be
accepted, and the syndicate may buy or sell the securities for its own account.
A dealer is soliciting prices from other dealers in an effort to obtain execution for a
customer. This is known as a(n):
Fill-or-kill
All-or-none
