Series 99: 1.2.4.1.6 Collateralized Mortgage Obligations

Taken from our Series 99 Top-off Online Guide

1.2.4.1.6 Collateralized Mortgage Obligations

CMOs are debt instruments backed by a pool of mortgage pass-through securities or mortgage loans. They vary in risk from very safe to very risky. All advertisements, sales literature, and correspondence concerning CMOs:

• Must include in the name of the offered product the term “collateralized mortgage obligation”
• May not compare CMOs to any other investment vehicle
• Must disclose that a government agency backing applies only to the face value of the CMO and not to any premium paid

Prior to the sale of a CMO, a customer must be offered educational material that will discuss the characteristics and risks of the instrument, the complexity of its structure, and the relationship between mortgage loans and mortgage securities. Promotional material for CMOs is required to contain these disclosures and more.

FINRA Rule 2216

Summary Retail Communication Disclosures
• Name of the offered product, including the term “collateralized mortgag

Collateralized Mortgage Obligation

Securities Futures

• Name of the offered product, including the term “collateralized mortgag

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