Chapter 1 Practice Question Answers
- 1. Answer: B. If an underwriter meets certain requirements, it may function as a municipal advisor, as long as the municipal entity relies on the advice of its municipal advisor. However, a municipal advisor may never act as an underwriter.
- 2. Answer: C. The MSRB does not enforce its own rules. These rules affect brokers and dealers, not issuers. The Board was created by the Securities Acts Amendments of 1975, and it is composed of 21 members, each of whom serves a term of three years.
- 3. Answer: D. As long as an investment adviser restricts its advice to the investment of bond proceeds and does not provide advice about the issuance of a bond, it will not have to register as a municipal advisor.
Municipal advisor activities include providing advice about the issuance of securities, as well as providing advice about financial products to municipalities. This means that financial advisors are required to register as municipal advisors.
- 4. Answer: A. A municipal securities firm must pay an initial registration fee of $1,000 and an annual registration fee of $1,000.
- 5. Answer: D. Failure to pay the annual fee may result in a $25 monthly late fee, as well as an additional fee on the unpaid balance. The annual fee must be paid by October 31. Form A-12 must be affirmed within 17 days of the end of the calendar year and must be updated within 30 days of becoming inaccurate.
- 6. Answer: B. According to the Securities Exchange Act, applications for employment, as well as questionnaires for employment, must be kept for three years. Blotters and customer account information must be kept for six years, and customer complaint records must be kept for four years.
- 7. Answer: A. Insider tr