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A member of a municipal new issue syndicate is entering an order for an accumulation account being used for a unit investment trust that the firm underwrites. This order must be entered as a(n):
  1. Pre-sale order
  2. Related portfolio order
  3. Contingency order
  4. AON order
MSRB rules require a syndicate member to disclose to the syndicate an order for a unit investment trust or an accumulation account to be used for a unit investment trust. The disclosure is accomplished by entering the order as a related portfolio order. (10-11)
Which of the following types of securities may a municipal securities representative sell?
  1. Municipal bonds
  2. Government bonds
  3. Corporate bonds
  4. Municipal unit investment trusts
  1. I only
  2. I and III only
  3. I and IV only
  4. I, II, III, and IV
A municipal securities representative may sell municipal bonds. The municipal securities representative, according to the MSRB, is not properly licensed to sell government bonds, municipal unit investment trusts, or any type of corporate securities. (10-11)
Where are the priority provisions for allocating bonds listed for a new municipal bond offering?
  1. Official statement
  2. Underwriters agreement
  3. Offering circular
  4. Settlement letter
The priority provisions of how bonds will be allocated to members of the municipal bondsyndicate will be indicated in the underwriters agreement (syndicate letter). The usual priority of orders is pre-sale, group net, designated, and member orders at the takedown. (10-9)

The calculation used by issuers to award bonds that takes into account the time value of money is known as:
  1. Net interest cost
  2. True interest cost
TIC differs from NIC in that it takes the time value of money into consideration.





The role of the MSRB is to do all of the following EXCEPT:

  1. Formulate rules for the municipal securities industry

  2. Interpret its rules for broker-dealers and dealer-banks

  3. Inspect member firms at least once each year

  4. Enforce its rules when violations occur





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 fordealer banks. Also, the MSRB does not set commissions rates or regulate new issues (municipals are exempt from new issue regulations)

Which of the following is not used to determine the winning bid in a competitive bond offering?
  1. Reoffering Yields
  2. Bond years
  3. NIC
  4. TIC
Reoffering yields are based on the price paid by purchasers and are not a part of the underwriters bid. Bond years are calculated by multiplying the number of $1,000 par valuebonds by the years to maturity. When the bond years of each maturity are multiplied by the respective coupon rate and then totaled, the result is the net interest cost for this issue.NIC and TIC are used to determine the cost of the bid to the issuer.

A person hired by a municipal dealer must be registered:
  1. Within 90 days of his date of hire
  2. Within 90 days of the end of the apprenticeship period
  3. Before effecting a transaction with a customer
  4. Before effecting a transaction with another dealer
A person must qualify as a municipal representative prior to effecting a transaction with a customer. To become qualified, the individual must pass a qualifying exam and serve a 90 day apprenticeship. There is no requirement that the person be registered in a specific time period after hire, however, the person may only act as an apprentice for a maximum of 180 days.

The resolution for a revenue bond would contain all of the following EXCEPT:
  1. Insurance covenant
  2. Provisions to provide financial reports
  3. Additional bonds covenant
  4. Amount of the good faith deposit
The bond resolution or indenture contains the covenants, flow of funds provision, and provisions to provide financial reports. The amount of the good faith deposit would be found in the Notice of Sale and Syndicate Letter. (10-2, 8-12)
A new municipal underwriting is shown as 1/8 + 1/4. What is the discount to a member?
  1. $1.25
  2. $2.50
  3. $3.75
  4. $5.00

In a new municipal securities offering, a member of the syndicate will receive a discount, from the public offering price, equal to the total takedown. The total takedown is broken into two parts, the concession and the additional takedown. A member is entitled to both and would therefore receive a discount of 3/8 point ($3.75 per $1,000). A nonmember of the syndicate would buy bonds less the concession ($1.25 per $1,000).
A revenue bond's indenture will include which of the following?
  1. The legal opinion
  2. A rate covenant
  3. The maturity feature
  4. Reoffering yields
  1. I and II only
  2. I and III only
  3. I, II, and III only
  4. I, II, III, and IV
revenue bond's indenture would include the legal opinion, the rate covenant, and thematurity feature. A rate covenant is the agreement of the municipality to maintain rates that are charged to customers for the use of a facility at a sufficient level to pay debt service.Reoffering yields are not found in the indenture of the revenue bond. Reoffering yields are the rates at which the syndicate bidder will offer the bonds to the public, after buying the bonds from the municipality. (10-7, 8-12)
Who prepares the syndicate agreement for a municipal underwriting?
  1. Counsel for the issuer
  2. Counsel for the underwriters
  3. Financial officer of the syndicate
  4. Issuer
The underwriter's counsel is an attorney who represents the interest of the underwriters. His duties may include negotiating the underwriting agreement, reviewing the issuer'sbond resolution , and reviewing the official statement.
All of the following statements are TRUE regarding an official statement for a new issue of municipal securities EXCEPT:
  1. Issuers do not have to make an official statement available
  2. If one is prepared, an official statement must be filed with the SEC prior to the offering
  3. An official statement provides purchasers of the new issue with detailed financial information about the issue
  4. If an official statement is prepared, MSRB rules require that it be sent out to customers at or prior to settlement date
Municipal issuers are exempt from the full disclosure and prospectus requirements of theSecurities Act of 1933. They cannot be required to prepare an Official Statement by the SEC, MSRB, or any other regulatory body. If one is prepared, it does not have to be filed with any regulatory body. The issuer will usually provide an official statement because the underwriting syndicate wishes to provide information to prospective investors and thereby help market the issue.
Good faith deposits
Both new issue and secondary joint accounts act according to an account agreement which will contain takedown and concession. An order period will also be used for both. Good faith deposits relate only to a new issue, since that is the amount that the syndicategives to the issuer along with the bid.
Where would a listing of the allocation of bonds for a new municipal issue be found?
  1. Notice of Sale
  2. Underwriting Agreement
  3. Account Summary Report
  4. Official Statement
After the sale of a new issue, the syndicate manager must distribute a summary of the account to the members of the syndicate. This summary statement will include the allocation of bonds
The manager of a new issue municipal syndicate wants to allocate securities in a different manner than specified in the syndicate agreement. He may do this if he:
  1. Notifies the SEC
  2. Amends the syndicate agreement
  3. Is prepared to justify the change to the syndicate members
  4. Assumes any losses incurred by the syndicate members
The syndicate manager is permitted to change the priority of orders if in his opinion it is in the syndicate's best interest. He must be able to justify the change to the syndicate members.
Which of the following new bond issues would most likely be purchased through competitive bidding?
  1. Corporate bonds
  2. General obligation bonds
  3. High yield bonds
  4. Revenue bonds
Of the choices given, the issue that would most likely be purchased through competitive bidding would be general obligation bonds. This is usually the method by which most general obligation bonds are sold. Corporate and revenue bonds are usually sold on a negotiated basis and income bonds are usually issued when a corporation that is inbankruptcy is being reorganized.
When preparing a bid for a new municipal issue, the underwriting syndicate would first determine the:
  1. NIC
  2. Reoffering yields
  3. Bid price
  4. Coupon rates
To profit from the underwriting, the syndicate must be able to sell the bonds to the public. The syndicate will first determine the yields it believes will be necessary to sell the bonds.
In a new municipal issue, what is a group order?
  1. An order placed by 3 or more members
  2. An institution purchasing bonds from a syndicate
  3. All members will benefit from the order
  4. A dealer buying for a group of investors
There are four types of orders that can be placed with a syndicate.
  1. pre-sale order is any order placed before the syndicate actually purchases the issue from the issuer.
  2. group order is when all members of the syndicate share in the profit.
  3. designated order is usually placed by a large institution which designates two or more members to receive credit for the sale.
  4. member order is any order placed by members for their customers.
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