Chapter Six
Underwriting and Disclosure Obligations
(4 questions, 6% of the exam)
Municipal securities are exempt from the registration rules of the Securities Act of 1933. But this doesn’t mean that when a municipality decides to raise money by issuing municipal securities it is allowed to sell these securities to anyone in any way it pleases. The federal government regulates this industry indirectly by regulating the actors (i.e., brokers, dealers, and underwriters) who underwrite and sell the securities.
An underwriter is one such actor. The MSRB defines underwriting as the process of purchasing any part of a new issue of municipal securities from the issuer and offering the securities for sale to investors. Underwriters are