Major events
MSRB - correspondance
A correspondence is any written or electronic message distributed to less than 25 persons within a 90 day period. Unlike an advertisement, a correspondence does not require principal approval prior to first use.
Who is regulated by MSRB
Brokerage firms and bank municipal dealers, along with all market participants involved in the sale of municipal securities, are subject to provisions of the MSRB. Issuers of municipal securities are not.
Closed-end funds are subject to regulation by which of the following?
Closed-end companies are subject to regulation under all major securities Acts, including the Securities Exchange Act of 1934, the Investment Company Act of 1940 and the Investment Advisors Act of 1940. The Securities Act of 1933 also applies when the closed-end fund is first issued.
All of the following enforce municipal securities industry rules
Enforcement and inspection for compliance with MSRB rules is done by the SEC and FINRA for brokerage firms and by the FRB, FDIC, and the Office of the Comptroller of the Currency for dealer banks.
Why are U.S. Treasury Securities used for conducting Open Market Operations?
In order to manage open market operations, the Open Market Committee needs the ability to buy and sell quickly in whatever volume of securities needed. The market for U.S. Treasury securities offers these capabilities, as it is the broadest and most active of U.S. financial markets.
The principal and interest of most certificates of deposit is insured by
Individuals are attracted to certificates of deposit (CDs) largely because their principal and interest is insured up to a limit by the Federal Deposit Insurance Corp. (FDIC). The limit currently is $250,000 per depositor.
Variable annuities are subject to which of the following securities regulations?
Like mutual funds, variable annuities are subject to most securities regulations. The Securities Act of 1933, The Securities Exchange Act of 1934, The Investment Company Act of 1940 and the Investment Advisors Acct of the 1940 apply to variable annuities.
comparison of a mutual fund and a hedge fund will show that
Mutual funds may invest in various types of securities, including both debt and equities, while hedge funds can invest in a broad array of securities, as well as other alternative products, such as real estate and commodities. Mutual funds will use more traditional securities products, as their federal regulations will limit the types of investments they can employ to achieve their stated investment objectives. Hedge funds, owing to lighter federal regulation, can use far more expansive styles and products to achieve their investment goals.
What was MSRB created for?
Propose and implement new rules for industry practitioners The MSRB has the authority to propose and implement new rules for the municipal securities industry, but it does not have the authority to enforce its rules. Enforcement is handled by FINRA and federal banking regulators.
Fed 3 main tools
Open market transactions Discount rate Reserve requirements
The fed does not control
The Federal Reserve Board does not control taxation; the rate of taxation can only be changed by Congress and is a tool of fiscal policy. The Federal Reserve Board will loosen credit, or make more money available, by lowering the bank reserve requirement, buying securities on the open market and reducing the margin requirement.
All of the following enforce MSRB Rules
The Federal Reserve Board, Comptroller of the Currency, and Federal Deposit Insurance Corporation are all enforcers of MSRB rules within bank dealers. The MSRB has no enforcement power over the rules it establishes.
According to MSRB rules, advertising records must be maintained for what about FINRA
Under MSRB rules, records of advertisements must be maintained for four years. Note that under FINRA rules, advertisements must be kept for three years. If the exam question does not specifically refer to FINRA or MSRB, assume they are testing the FINRA rule.
The antifraud protections under MSRB rules are very ____in scope
broad
The rules of the MSRB cover
standards of professional qualification, compliance examinations, confirmations, clearance, settlement and many other aspects of doing business in municipal securities.
Which of the following apply to sale of variable insurance products? I. FINRA Suitability requirementsII. The Know Your Customer RuleIII. Anti-Fraud Provisions of the Securities Act of 1934
All Variable products are securities because customers may lose money. They are subject to FINRA rules of suitability and the Know Your Customer rule which requires the collection of sufficient information to understand investment objectives. The anti- fraud provisions of the Securities Exchange Act of 1934 apply to the sale of all securities.
Which two of the following documents would be considered an advertisement under MSRB rules?
An abstract or summary or abstract of an Official Statement and form letters are considered advertising. Materials prepared by dealers, or third parties on their behalf, that is designed to communicate with the public are advertisements. Preliminary Official Statements, Official Statements, dealer offering lists, and memos for internal use only are not communications with the public.
Which of the following regulators enforce the MSRB rules for securities firms?
FINRA The MSRB creates rules, but does not enforce its own rules. The MSRB rules are enforced by FINRA for securities firms. Within banks, they are enforced by the Federal Reserve, Comptroller of the Currency, and the FDIC.
The rulemaking authority of the MSRB does not
MSRB rules do not apply to registration of new issues. Municipal issues are exempt from registration requirements under the Securities Act of 1933. The rules of the MSRB cover standards of professional qualification, compliance examinations, confirmations, clearance, settlement and many other aspects of doing business in municipal securities
Monetary policy in the US is controlled by (the) Fiscal is
Monetary policy is controlled by the FRB. Fiscal policy is controlled by Congress.
FDIC insurance covers losses in each of the following types of products offered by banks EXCEPT:
Money market mutual funds sold through banks are not deposits and are not FDIC insured. All bank deposit products are covered by FDIC.
SIPC protects ___________, while the FDIC protects _________
SIPC protects brokerage accounts (stocks, bonds, mutual funds, etc.), while the FDIC protects bank accounts (savings and checking accounts)
Exempt securities
Securities that are exempt from registration with the SEC. US government securities and US government agency securities Securities issued by nonprofits Municipal bonds Commercial paper and other short-term corporate debt with a maximum maturity of no more than 270 days Commercial bank securities
Organizations that have regulatory oversight over variable products include all of the following EXCEPT
The FDIC is a banking regulator and does not have regulatory authority over variable products. Securities regulators and insurance regulators are charged with regulatory oversight of variable products. These regulators include the SEC, FINRA, and state insurance commissioners.
The fundamental responsibility of Federal Reserve Open Market Operations is to manage
The Fed's Open Market Committee is charged with conducting monetary policy, and managing the money supply. Its most flexible tool is the execution of open market operations.
The regulator charged with determining Reg T requirements for margin accounts is
The Federal Reserve Board is authorized by the Securities Exchange Act of 1934 to establish Reg T requirements. The current Reg T requirement for long and short margin accounts if 50%.
The MSRB annual gift limit
The MSRB annual gift limit is $100 per year for gifts given in connection with the business of the employer of the recipient. Exceptions are made for occasional gifts of tickets or meals.
The entity that controls the money supply acts as the U.S banking regulator and serves as a banker to the government is the
The U.S. Central Bank, or Federal Reserve is the banker to the U.S. government and is responsible for the monetary policy of the country. It also regulates other banks in the national banking system.
Under which regulation does the Federal Reserve impose restrictions on margin lending, including the types of securities that are eligible collateral for margin loans?
The determination of which securities can be margined, and the maximum margin ("leverage") on each type is made by restrictions imposed by the Federal Reserve under Regulation T. Each broker-dealer can impose additional margin rules and restrictions for its own customers. Regulation T is considered an important Fed tool in its overall oversight over U.S. credit extension.
What agency stands behind the promises of SIPC to protect assets held in customer accounts at brokerage firms?
The difference between FDIC and SIPC insurance is that only one has an "F" in the name i.e., is federally backed. SIPC is a not-for-profit corporation, and only SIPC's assets stand behind its promises. If necessary, SIPC can increase assessments against its members (brokerage firms) to meet obligations.
The banking entity that is engaged in the purchase and sale of government securities with primary dealers is the
U.S. Central bank The U.S. Central banks, or Federal Reserve Board banks, are the bankers for the U.S. government. They purchase and sell government securities from primary dealers to regulate the money supply.
SEC
US government agency that is responsible for enforcing federal securities laws and regulating the securities industry.
Non exempt securities - must be SEC registered
corporate bonds, stocks, ADRs, and investment company securities
The fed sets the
discount rate although the Fed has a target Fed Funds Rate, it does not actually set the rate. The Fed sets the Discount Rate.
The short-term effect of the Federal Reserve's Open Market Committee is to
make credit more or less available The Fed buys and sells securities in the marketplace to increase or decrease the money supply, making credit more or less available. When the Fed buys securities it is putting money into circulation, increasing the money supply and making credit more available. When the Fed sells securities it is taking money out of circulation, decreasing the money supply and making credit less available. Long term, these actions may check inflation or stop a recession.
MSRB rules protect
municipal issuers from unfair practices and fraud by municipal securities firms and their representatives
The MSRB political contribution rule
prevents municipal securities broker-dealers from engaging in any negotiated underwriting with an issuer, where the firm or a municipal finance professional of that firm, makes a contribution of more than $250 to an official of that issuer. If the professional is not eligible to vote for the issuer official, they may not contribute any cash to the official's campaign.
MSRB Rules do NOT apply to:
registration of new issues of municipal securities. Municipal issues are exempt from registration requirements under the Securities Act of 1933. The rules of the MSRB cover standards of professional qualification, compliance examinations, confirmations, clearance, settlement and many other aspects of doing business in municipal securities.
What is a record that is required by MSRB rules
require that a record is kept of only written, not verbal, complaints. The record must include the actions that have been taken to resolve them. Records must also be created and maintained of the person designated as responsible for recordkeeping by a municipal securities firm, of periodic municipal fund securities statements, and of signed arbitration agreements with customers who open accounts.
The MSRB's telemarketing rule
requires the caller to disclose the reason for the call, the name of the caller and the firm with whom the caller is associated and the telephone number and the address at which the caller can be contacted. The source of the lead and contact information is not required disclosure.
