Chapter 1 Practice Question Answers
1. Answer: B. If an underwriter meets certain requirements, it may meet the underwriter exclusion, and under this exclusion it can advise the municipality without registering as a municipal advisor.
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 15 members, each of whom serves a term of four 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 by January 31 each year and must be updated within 30 days of becoming inaccurate.
6. Answer: C. Municipal advisors must maintain copies of their WSPs for five years.
7. Answer: A. Insider trading is prohibited, but if no one trades on the material, nonpublic information that was shared, then insider trading has not occurred. Dealers are prohibited from spreading rumors about a security to make it appear to be trading better or worse than it really is. Any conflicts of interest must be disclosed to customers in writing, and a broker may not omit material facts when helping an investor to make an investment decision about a security.
8. Answer: B. Most misdemeanors would not result in a statutory