Chapter 2 Practice Question Answers
- 1. Answer: D. To conduct municipal securities business, a person must be registered as a municipal securities representative. Municipal securities business includes:
- » Underwriting, trading, or sales of municipal securities
- » Financial advisory or consultant services for issuers in connection with the issuance of municipal securities
- » Research or investment advice with respect to municipal securities
- » Any other activities that involve communication, directly or indirectly, with public investors in municipal securities
- 2. Answer: B. Under MSRB Rule G-27, broker-dealers are obligated to ensure that their firm and all employees comply with MSRB and SEC rules and all applicable laws. To achieve this result, firms must establish and maintain written procedures as a guide for employee behavior and establish a supervisory system to oversee their compliance. One or more principals must be assigned to enforce this system of supervisory controls and the written procedures should identify the principals and their areas of supervisory responsibility. Each firm must conduct an annual review of its municipal securities activities to detect violations and achieve compliance with MSRB and SEC rules.
- 3. Answer: C. Broker-dealers are required to update their supervisory procedures as necessary to respond to changes in applicable rules or law, or changes in their business. While changes in personnel could necessitate a change in the written supervisory procedures to ensure that appropriate principals are designated to enforce supervisory controls, this would not always be the case. The other options presented would trigger MSRB Rule G-27’s requirement to update a firm’s supervisory procedures.
- 4. Answer: C. MSRB Rule G-3 requires that all municipal securities broker-dealers have at least two municipal securities principals. However, there are two exceptions to this rule:
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