Chapter Two Practice Question Answers
1. Answer: C. A non-solicitor municipal advisor is considered to be a fiduciary of its municipal entity clients. This means the non-solicitor municipal advisor must always put the interests of its municipal entity clients ahead of its own. However, this does not mean the municipal advisor is expected to remove all risk when making recommendations to clients because risk is a part of investing.
2. Answer: A. MSRB Rule G-44 requires municipal advisors to create a supervisory system that includes written supervisory procedures, the designation of one or more principals to implement the system, and the designation of a chief compliance officer to serve as the main advisor to the firm on its overall compliance program. Under MSRB Rule G-44, a firm is not required to designate offices of supervisory jurisdiction.
3. Answer: A. As part of its rule on supervision, the MSRB requires each firm to establish, implement, and maintain a system to supervise municipal advisory activities and municipal advisory associates. The system requires the designation of a principal or principals to oversee it. However, there does not need to be a principal to oversee the system at each of the firm’s offices. The rule also requires that each municipal advisor shall designate one individual to serve as its chief compliance officer. Additionally, the firm’s CEO must annually provide written certification that the municipal advisor has reasonable compliance procedures and processes in place. There is no requirement for the firm to provide annual updates to clients regarding its supervisory system.
4. Answer: B. MSRB Rule G-44 states that a municipal advisor must make one or more principals responsible for implementing the firm’s supervisory system. Associated persons are not allowed to implement the supervisory system.
5. Answer: D. As part of MSRB rules on supervision for municipal advisory firms, each firm must establish policies