Series 7b

Ace your homework & exams now with Quizwiz!

redemption fee

-but all fees combined, ie, up front sales charge and redemption fee, cannot exceed 8-1/2% of POP

Which statement is FALSE regarding the conduct of Treasury Bill auctions? A. 4 week, 13 week and 26 week T-Bills are auctioned weekly B. 1 year T-Bills are auctioned monthly C. Non-competitive bids take priority over competitive bids D. Bids are awarded based on the lowest discount yield except for 26 week bills which are sold at par (D) - false

4 week, 13 week and 26 week Treasury Bills are auctioned weekly; 1 year T-Bills are auctioned monthly. Because the amount of securities represented by non-competitive bids are withheld from auction and are always filled at the average winning yield, these bids have priority. Competitive bids will not be filled if the yield specified is too high. The bids are always awarded on the basis of lowest discount yield.

Which statements are TRUE regarding the conduct of Treasury Bill auctions? I 4 week, 13 week and 26 week T-Bills are auctioned weekly II 1 year T-Bills are auctioned monthly III Non-competitive bids take priority over competitive bids IV Bids are awarded based on the lowest discount yield except for 26 week bills which are sold at par A. I and III only B. I, II, IV C. I, II, III D. II, III, IV (C)

sales charge %-age = ASK - BID / ASK

= A - B / A

The minimum price at which a closed end fund share can be purchased is: A. Net Asset Value B. Net Asset Value plus a commission C. Market Price D. Market Price plus a commission (D)

A closed end fund is traded in the market like any other stock. Any purchaser would pay the prevailing market price (which can be below, at, or above Net Asset Value) and would have to pay a commission to have the trade executed. Thus, a closed end fund share is purchased at the prevailing market price plus a commission. This contrasts to mutual fund (open end management company) shares that are newly issued by the fund to any purchaser. The purchaser pays the next computed Net Asset Value plus a sales charge (if the fund imposes a "sales load").

A closed end fund has a Net Asset Value of $10 per share. The minimum price at which the shares can be purchased is: A. $10 B. $10 plus a commission C. market price D. market price plus a commission (D)

Which of the following funds MUST be a closed end fund? I Net Asset Value = $10 / Purchase Price = $9.50 II Net Asset Value = $10 / Purchase Price = $10 III Net Asset Value = $10 / Purchase Price = $10.50 A. I only B. I and II C. II and III D. I, II, III (A) - only :. Thus, the minimum price for a mutual fund is Net Asset value; while the only type of fund that can trade for less than Net Asset Value is a closed end fund.

Diversified Fund 75-5-10 Rule

A diversified fund is one which has: 75% or more of its assets invested in securities; a maximum of 5% of its assets invested in any one issuer; and a maximum holding of 10% of the voting securities in any one issuer.

New issue municipal "group" orders are placed: A. for the benefit of a joint account that is offering those securities B. by municipal broker's brokers for institutional clients C. for the benefit of the syndicate account as a whole D. for the benefit of a particular syndicate member (C)

A municipal "group" order is placed by a syndicate member for the benefit of the group account. This order has priority after pre-sale orders. Following municipal group orders, the manager fills "designated" orders, which designate that the profit goes to a designated syndicate member, who can pass along part or all of that profit to the customer who placed the order as a discount.

The term "mutual fund" is the common name for a(n): A. open end management company B. closed end management company C. fixed unit investment trust D. participating unit investment trust (A)

A mutual fund portfolio is managed by an investment adviser and the fund continuously issues and redeems its common shares - so it is an "open end" management company.

A closed-end management company is a: A. mutual fund B. publicly traded fund C. fixed unit investment trust D. participating unit investment trust (B)

A publicly traded fund has a 1 time stock issuance; closes its books to new investment and then lists its stock on an exchange or NASDAQ. The stock then trades like any other common stock, except the company is in the business of making investments; instead of say, making cars, beer, or computers. Thus, this type of fund is a "closed-end" fund - that is, closed to new investment.

The term "publicly traded fund" is the common name for a(n): A. open end management company B. closed end management company C. fixed unit investment trust D. participating unit investment trust (B)

A variable annuity is a: A. face amount certificate company B. management company C. fixed unit investment trust D. participating unit investment trust (D)

A variable annuity is a participating unit investment trust. The trust is an "umbrella vehicle" used to collect payments from annuity contract holders. The trust invests the funds in one type of security only - shares of management companies. These are held in a "separate" investment account; and the performance of the securities in the separate account determines the amount of the annuity to be received.

All of the following securities are sold through auction EXCEPT: A. Treasury Bills B. Treasury TIPS C. General Obligation Bonds D. Government National Mortgage Association Bonds (D)

All agency securities, including GNMA issues, are sold through selling syndicates in a negotiated offering. T-Bills and TIPS - Treasury Inflation Protection Securities - are sold through yield auctions conducted by the Federal Reserve for the Treasury. General Obligation municipal bonds are sold through competitive bid as well.

A syndicate member places an order for a new issue municipal offering, that, if filled, will be placed in a municipal bond fund managed by that member. This order is: I "member-related" II "non-member related" III filled first, as non-public orders take precedence IV filled last, as public orders take precedence A. I and III B. I and IV C. II and III D. II and IV (B)

An order placed with the syndicate by a member for an "accumulation account" being managed by that member is unusual in that the bonds are not being sold to the general public. They really are being retained by a syndicate member for his own use. The syndicate member must disclose this to the manager when the order is placed; the manager will disclose any of these orders that have been filled to the other syndicate members when the account is closed; and the manager will fill these orders last- meaning they get priority after pre-sale, group, and designated orders. They are treated as member takedown orders, and if there is sufficient interest in the issue, would not be filled because of the other orders with higher priority.

A municipal bond dealer gives a quote on a new issue 20 year, 5% General Obligation bond. The quote includes a 20 basis point mark-up. Because of the mark-up, which statement is TRUE? A. The dollar price of the bond will increase; the yield on the bond will decrease B. The dollar price of the bond will decrease; the yield on the bond will increase C. Both the dollar price and the yield on the bond will increase D. Both the dollar price and the yield on the bond will be unaffected (A)

Any "mark-up" of a new issue purchased by a dealer at a net offering price less a concession, is defined by the MSRB as any remuneration in addition to the concession received by the dealer as a result of increasing the offering price on the securities. If the offering price is increased, the yield on the bond must decline. The terminology used in the question might appear to be a little confusing at first, since this dealer took a "20 basis point mark-up," and basis points usually refer to yield movements. Thus, one might assume that the 20 basis point mark-up means that the dealer is increasing the yield and reducing the price. This is not the case. New issue municipal terminology works as follows: Assume that the original offering basis on the bonds was 5.20%. Then, the market changed, and the bonds are "raised in price" by .20 ("marked-up"). The new price is now 5.00%. Thus, the basis is decreased and the price is raised.

Which statements are TRUE regarding bids placed at the Treasury Auction? I Competitive bids are always filled II Non-competitive bids are always filled III Competitive bids are not always filled IV Non-competitive bids are not always filled A. I and II only B. III and IV only C. I and IV only D. II and III only (D)

At the weekly Treasury auction, non-competitive bids are always filled at the average winning yields of the competitive bids. Only the lowest interest rate competitive bids are filled; the higher rate competitive bids that exceed the amount of securities up for auction that week are rejected.

Most ETFs Are Open-End Funds Registered Under The Investment Company Act Of 1940

Because ETFs permit the creation of additional shares via their arbitrage mechanism, they are, technically, open-end funds registered under the Investment Company Act of 1940. However, because they are listed and trade like any other stock, in this way they are similar to closed-end funds. :. The important point for the exam is that ETFs are registered as open-end funds, not closed-end funds.

All of the following statements are true regarding the conduct of the weekly treasury auctions EXCEPT: A. Competitive bids will always be filled B. Non-competitive bids take priority over competitive bids C. 3 month T-Bills are auctioned weekly D. 6 month T-Bills are auctioned weekly (A)

Because the amount of securities represented by non-competitive bids are withheld from auction and are always filled at the average winning yield, these bids have priority. 4 week, 13 week and 26 week Treasury Bills are auctioned weekly. Competitive bids will not be filled if the yield specified is too high. The bids are always awarded on the basis of lowest discount yield.

The essential difference between an open end management company and a closed end management company is: A. management B. capitalization C. investment objective D. regulation (B)

Both open-end and closed-end management companies use an investment adviser to manage a portfolio within the fund's stated objectives. Open-end funds continuously issue and redeem shares. Closed-end funds have a one-time stock issuance and the fund is closed to new investment. The shares are then listed on an exchange or NASDAQ where they trade. Therefore, open-end and closed-end funds are capitalized differently. Both types of funds are regulated under the Investment Company Act of 1940.

The principal difference between an open end management company and a closed end management company is: A. capitalization B. management C. investment objective D. expense ratio (A)

Both open-end and closed-end management companies use an investment adviser to manage a portfolio within the fund's stated objectives. Open-end funds continuously issue and redeem shares. Closed-end funds have a one-time stock issuance and the fund is closed to new investment. The shares are then listed on an exchange or NASDAQ where they trade. Therefore, open-end and closed-end funds are capitalized differently. The expense ratio of a fund measures of the "cost" of running the fund, and applies to both open and closed end funds (the largest component of the cost of running either type of fund is the annual management fee).

Which of the following investment company securities is NOT redeemable? A. Open end fund shares B. Closed end fund shares C. Fixed unit investment trusts D. Participating unit investment trusts (B)

Closed-end fund shares are not redeemable - they are listed on an exchange and trade like any other security. Open-end fund shares are redeemable with the fund itself and do not trade. Unit trust interests are also "redeemable" securities, in the sense that the trust sponsor makes a market in trust units, and will buy them back from the purchaser. There is no "trading" of trust units, however.

Lower Maximum Sales Charge For 12b-1 Funds

FINRA requires that 12b-1 funds can impose a maximum sales charge of only 7 ¼% (instead of the 8 ½% allowed for non-12b-1 funds) if the fund does not impose fees for account maintenance; and 6 ¼% maximum if the fund does impose service fees for account maintenance.

Which of the following terms apply to fixed unit investment trusts? I Managed II Unmanaged III Regulated IV Unregulated A. I and III B. I and IV C. II and III D. II and IV (C)

Fixed unit investment trusts are not managed; the portfolio is fixed and does not change. These are typically bond trusts, where a diversified portfolio of bonds is assembled and placed into trust; with units of the trust sold to investors. These are non-exempt securities that must be registered with the SEC and sold with a prospectus. They are regulated under the Investment Company Act of 1940 and are redeemable with the sponsor, who makes a market in trust units.

The syndicate manager decides to decrease the reoffering yield on a competitively bid new issue by 25 basis points. This action: A. is prohibited under MSRB rules B. will decrease the dollar price per bond paid by customers C. will increase the dollar price per bond paid by customers D. will not affect the dollar price per bond paid by customers (C)

In a competitive bid new issue, the manager sets the reoffering yield lower than the interest rate printed on the bonds. Thus, the syndicate will have a profit on the issue, since it buys the bonds at par at the stated interest rates; and reoffers them a lower yields to the public (with the price to the public being at a premium to par). The reoffering yield is not cast in stone - if market interest rates fall, the manager can drop the reoffering yields to match the market. This will further increase the price of the bonds to the public (and increase the profit to the syndicate as well).

All of the following items are associated with a competitive bid offering of General Obligation bonds EXCEPT: A. Official Notice of Sale B. Official Statement C. Legal Opinion D. Prospectus (D)

In a competitive bid offering of municipal bonds, the issuer solicits bids on the issue by placing an Official Notice of Sale in the Daily Bond Buyer. Once the bid is awarded, the bonds are printed with the winning interest rates and delivered to the winner, who pays the issuer for the securities. The securities are then reoffered by the winning syndicate. New issue disclosure on municipal bonds is given through the Official Statement; there is no prospectus requirement since these issues are exempt from the Securities Act of 1933. Any new long term municipal issue cannot be offered unless there is a legal opinion given on that security. The legal opinion is rendered by the Bond Counsel; who examines the validity of the issue, its legality, and tax exempt status.

In a competitive bid municipal underwriting, which of the following is disclosed to customers? A. Spread B. Reoffering Yield C. Participations of the Underwriters D. Expenses of the Underwriters (B)

In competitive bid municipal underwritings, the spread is not required to be disclosed, since it would be quite narrow. Only the reoffering yield and resultant dollar price is disclosed. There is no requirement to disclose the names of the underwriters, nor their participation amounts or expense allocations.

In a competitive bid municipal underwriting, which of the following statements are TRUE? I The spread is disclosed II The spread is not disclosed III Each underwriter's participation must be disclosed IV There is no requirement to disclose each underwriter's participation A. I and III B. I and IV C. II and III D. II and IV (D)

In a negotiated municipal underwriting, which of the following is disclosed to customers? A. Spread B. Names of the Underwriters C. Participations of the Underwriters D. Expenses of the Underwriters (A)

In negotiated municipal underwritings, the spread and offering price of each maturity must be disclosed. There is no requirement to disclose the names of the underwriters, nor their participation amounts or expense allocations.

Which statement is TRUE about non-competitive bids placed at Treasury auctions? A. Non-competitive bids have priority over competitive bids B. Competitive bids have priority over non-competitive bids C. Both non-competitive and competitive bids have the same priority D. All bids are given priority based on the size of the bid (A)

In the weekly T-Bill auction, the amount of non-competitive bids is set aside from the total securities to be auctioned and is always filled at the average winning rate. The remaining T-Bills to be auctioned are filled from the lowest interest rate bid on up. Once the issue is "sold out," the remaining higher rate competitive bids are void. Thus, non-competitive bids have priority at the weekly auction.

Which of the following are primary purchasers of Treasury securities? I Investment companies II Broker-dealers III Unit Investment Trusts IV Commercial banks A. I and II only B. III and IV only C. I and III only D. I, II, III, IV (D)

Investment companies such as government bond mutual funds, money market funds and unit investment trusts bid at auction to buy large blocks of Treasury securities directly, bypassing a dealer or broker and therefore saving commissions or markups. Commercial banks and broker-dealers that are primary dealers bid at Treasury auctions to buy securities for their inventories.

Which of the following statements are TRUE about investment companies? I An open end fund is a type of management company II A closed end fund is a type of management company III An open end fund is a mutual fund IV A closed end fund is a publicly traded fund A. I and III only B. II and IV only C. III and IV only D. I, II, III, IV (D)

Management companies are types of investment companies that are either open-end or closed-end. An open-end management company is a mutual fund. A closed-end management company is a publicly traded fund.

An open end fund has a Net Asset Value of $10 per share. The minimum price at which a share can be purchased is: A. $10 B. $10 plus a commission C. the market price D. the market price plus a commission (A)

Mutual fund (open-end management company) shares are newly issued by the fund to any purchaser. The purchaser pays the next computed Net Asset Value plus a sales charge if the fund imposes a "sales load." For a "no load" fund, the customer would simply pay Net Asset Value - this is the minimum price for an open-end fund. This contrasts to a closed end fund, where the fund is traded in the market like any other stock. Any purchaser would pay the prevailing market price (which can be below, at, or above Net Asset Value) and would have to pay a commission to have the trade executed. Thus, a closed-end fund share is purchased at the prevailing market price plus a commission.

Mutual fund shares are: I Negotiable II Redeemable III Managed IV Non-Managed A. I and III B. I and IV C. II and III D. II and IV (C)

Mutual fund shares represent an undivided interest in a portfolio of securities that is managed to meet an investment objective. Mutual fund shares do not trade - they are not negotiable. The shares are redeemed by the fund at Net Asset Value. The fund continuously issues and redeems its shares.

All of the following securities are redeemable EXCEPT: A. Common stock mutual funds B. Bond mutual funds C. Corporate debentures D. Series HH bonds (C)

Mutual funds - common stock and bond funds - are redeemable securities which do not trade. Savings bonds (Series EE and HH) sold by the U.S. Government are redeemable securities. There is no trading in these issues. To "cash out," they are redeemed with an agent for the Government - a bank or savings and loan. Corporate debentures are negotiable (tradeable) - they cannot be redeemed with the issuer. They trade OTC and on exchanges.

offering price =

NAV / 100% - sales charge %

Which of the following can be purchased on margin? I Mutual Funds II Initial public offerings of Closed End Funds III Closed End Funds trading on the NYSE A. I only B. III only C. II and III D. None of the above (B) - only Closed End Funds trading on the NYSE

New issues are not marginable. Every issue of a mutual fund (open-end management company) share is a "new issue" as is the initial public offering of a closed-end fund. Both are made with a prospectus. However, once closed-end fund shares trade in the market, they are marginable like any other listed stock.

Which of the following can be purchased on margin? I Mutual Funds II Initial public offerings of Closed End Funds III Closed End Funds trading on the NYSE IV Initial public offering of Fixed Unit Investment Trusts A. I and III only B. II and IV only C. III only D. I, II, III, IV (C)

New issues are not marginable. Every issue of a mutual fund (open-end management company) share is a "new issue" as is the original offering of a closed-end fund or a unit trust. Both are made with a prospectus. However, once closed-end fund shares are listed on an exchange and begin trading in the market, they are marginable like any other listed stock.

Which of the following statements are TRUE? I New issues of Treasury Bills are generally priced at par II New issues of Treasury Bonds are generally priced at par, or at a slight discount to par III New issues of Agency Bonds are generally priced at par, or at a slight discount to par A. I only B. III only C. II and III only D. I, II, III (C)

New issues of T-Bills are always sold at a discount to par value. These are original issue discount obligations, with the accretion of the discount being the interest income earned on these securities. Treasury Bonds and Agency Bonds are issued at par (or at a very slight discount to par), and make periodic interest payments.

Which of the following statements are TRUE regarding new issue government and new issue agency securities? I Agency securities are sold through a selling group II Agency securities are sold through auction III Direct U.S. government obligations are sold through a selling group IV Direct U.S. government obligations are sold through auction A. I and III B. I and IV C. II and III D. II and IV (B)

New issues of agency securities are sold through a selling group that is appointed by the Agency. The group typically consists of large banks and broker-dealers. Out of the proceeds, a selling concession is paid to the selling group by the agency. Direct U.S. Government obligations are sold through auction.

Which of the following statements are TRUE regarding new issues of U.S. Government agency securities? I The securities are sold through a selling group appointed by the Agency II The securities are sold through a selling group appointed by the Federal Reserve III The securities are sold at par IV The securities are sold at a par plus a mark-up A. I and III B. I and IV C. II and III D. II and IV (A)

An investor wishes to buy a new issue of U.S. Government agency bonds. You recommend that the customer purchase Federal Home Loan Bank bonds with a 20 year maturity. The new issue of Federal Home Loan Bank Bonds will be sold: A. through competitive bid at the weekly Treasury Auction B. directly by the Federal Home Loan Bank to interested investors C. through a selling group appointed by the Federal Home Loan Bank D. through the "Dutch" auction method that awards the bonds to the lowest rate bidders at an "average" winning rate (C)

New issues of agency securities are sold through a selling group that is appointed by the Agency. The group typically consists of large banks and broker-dealers. The group sells the issue at par to the public. Out of the proceeds, a selling concession is paid to the selling group by the agency. Direct U.S. Government obligations are sold through auction.

An investor wishes to buy a new issue of U.S. Government agency bonds. You recommend that the customer purchase Federal Farm Credit System bonds with a 10 year maturity. An investor who purchases the new issue can expect to pay: A. par value B. par value less a discount C. par value plus a mark-up D. par value plus a commission (A)

New issues of agency securities are sold through a selling group that is appointed by the Agency. The group typically consists of large banks and broker-dealers. The group sells the issue at par to the public. Out of the proceeds, a selling concession is paid to the selling group by the agency. In contrast, direct U.S. Government obligations are sold through auction.

A syndicate member in a municipal underwriting wishes to place an order for the new issue bonds with the manager. The bonds are to be purchased for the member's own portfolio. Under MSRB rules, an order for such a "related portfolio:" A. must be accorded "Pre-Sale" status by the manager B. must be disclosed to the manager as such at the time that the order is entered C. must be entered as a "Designated" order by the member D. cannot be entered by the syndicate member (B)

Orders for the member's own account or for "related portfolios" such as a municipal unit trust being formed by that member, must be disclosed as such to the manager at the time that the order is entered. Under MSRB rules, such orders are to be accorded last priority by the manager when filling orders. (The normal priority is "PGDM" - Pre-Sale; followed by Group Net; followed by Designated; followed by Member Takedown orders). This rule makes sense because the issuer wants the broadest distribution of its bonds as is possible. It does not want the bonds to be retained (concentrated) in the hands of syndicate members (who could then potentially exert undue influence over the "market valuation" of that issuer's bonds).

All of the following terms apply to publicly traded fund shares EXCEPT: A. one-time issuance B. managed C. redeemable D. negotiable (C) - not redeemable

Publicly traded fund shares represent an undivided interest in a portfolio of securities that is managed to meet an investment objective. A publicly traded fund has a 1-time stock issuance and then "closes" its books to new investment and then lists its stock on an exchange or NASDAQ. The stock then trades like any other common stock, except the company is in the business of making investments; instead of say, making cars, beer, or computers. Thus, this type of fund is "closed end."

Publicly traded fund shares are: I Negotiable II Redeemable III Managed IV Non-Managed A. I and III B. I and IV C. II and III D. II and IV (A)

The municipal "Placement Ratio," as computed weekly, is defined as: A. Bonds Sold by Underwriters divided by Total New Bonds Issued B. ?? C. Total New Bonds Issued divided by Bonds Sold by Underwriters D. Bond Buyer Index divided by Bonds Sold by Underwriters (A)

The "Placement Ratio" is: = bonds sold by underwriters to the public/ bonds purchased by underwriters fr issuers The ratio is computed weekly. A high ratio shows most new issues are being absorbed by the investing public. A low ratio shows that the public is not buying and the bonds remain on dealers' shelves.

The Bond Buyer "20" Bond Index consists of: I General Obligation Bonds II Special Tax Bonds III Revenue Bonds IV Moral Obligation Bonds A. I only B. I and II C. III only D. I, II, III, IV (A)

The Bond Buyer "20" bond index consists of 20 general obligation bonds with 20 years to maturity, all rated "A" or better.

The Bond Buyer 11 Bond Index contains: I General Obligation Bonds II Revenue Bonds III issues rated "A" or better IV issues rated "AA" or better A. I and III B. I and IV C. II and III D. II and IV (B)

The Bond Buyer 11 Bond index contains 11 G.O. bonds rated AA or better. The other indexes contain lower rated (A) issues.

The Bond Buyer 11 Bond Index contains: A. revenue bonds rated A or better B. revenue bonds rated AA or better C. general obligation bonds rated A or better D. general obligation bonds rated AA or better (D)

The Bond Buyer 11 Bond index contains 11 G.O. bonds rated AA or better. The other indexes contain lower rated (A) issues.

Which Bond Buyer Index contains the highest quality issues? A. 11 Bond Index B. 20 Bond Index C. Revdex D. Munidex (A)

The Bond Buyer 11 Bond index contains 11 G.O. bonds rated AA or better. The other indexes contain lower rated (A) issues.

Information about the municipal primary market can be obtained from all of the following EXCEPT: A. Munifacts B. CRD C. EMMA D. The Bond Buyer (B)

The Bond Buyer is the "new issue" municipal newspaper. Municipal issuers place announcements of new issues in this publication. Munifacts is the newswire service of the Bond Buyer, that mainly announces new issue offerings by syndicates, and also includes some general news items that can affect the secondary market. EMMA (Electronic Municipal Market Access) is the MSRB's website which includes copies of municipal new issue Official Statements. CRD is the Central Registration Depository, run by FINRA, which keeps the records of every registered individual in the U.S.

Which statements are TRUE about new offerings of 6-month T-Bills? I Treasury auctions are conducted on Monday of each week II Treasury auctions are conducted on Thursday of each week III Securities are issued, and settlement occurs, on the Monday following the auction IV Securities are issued, and settlement occurs, on the Thursday following the auction A. I and III B. I and IV C. II and III D. II and IV (B)

The Federal Reserve conducts Treasury Bill auctions weekly on Monday and Tuesday. The Bills are issued to the winning bidders, and must be paid for, on the Thursday immediately following the auction date.

Which of the following are defined as "investment companies" under the Investment Company Act of 1940? I Face Amount Certificate Company II Unit Investment Trust III Management Company IV Oil and Gas Leasehold Partnership A. I and II only B. III only C. I, II, III D. I, II, III, IV (C)

The Investment Company Act of 1940 defines 3 types of investment companies; face amount certificate companies, unit investment trusts, and management companies.

Under MSRB rules, which of the following documents, if prepared, must be sent to the purchaser of a new issue municipal bond? A. Tombstone B. Official Statement C. Official Notice of Sale D. Legal Opinion (B)

The MSRB requires that all purchasers of new issue municipal bonds receive a Final Official Statement, if one has been prepared. If the Final is not going to be prepared, but a Preliminary Official Statement is available, then this document must be sent. This document must be given to the customer no later than settlement of the transaction. (The rather "odd" wording that the "Official Statement, if prepared, must be delivered to customers" stems from the fact that the MSRB has no regulatory authority over municipal issuers and cannot require that municipal issuers prepare Official Statements. So instead, this is done through the "back door." The SEC wrote a rule stating that an underwriter cannot buy a new municipal issue unless it obtains a copy of the Official Statement (OS) and performs due diligence on it (so the OS will be prepared). And since the OS will be prepared, it will be delivered to each customer under the MSRB rule. You gotta love lawyers at work!)

To satisfy MSRB disclosure requirements for new municipal issues, a customer would be provided with a copy of the: A. legal opinion B. official notice of sale C. prospectus D. official statement (D)

The Official Statement is the disclosure document for new issue municipal bonds. If it is prepared by the issuer, it must be distributed to all purchasers by the underwriters at, or prior, to settlement.

A new issue municipal bond investor seeking information about an issuer's financial condition would examine the: A. Prospectus B. Official Notice Of Sale C. Trust Indenture D. Official Statement (D)

The Official Statement is the disclosure document, similar to a prospectus, for new municipal issues. Prospectuses are only required for non-exempt new issues under the Securities Act of 1933. Since municipals are exempt, there is no prospectus requirement. There is no legal requirement for issuers to prepare an Official Statement, but underwriters require them from issuers in order to perform due diligence on the issue; and to have a disclosure document that can be given to potential investors.

The Placement Ratio has been steadily increasing over the last 30 days. This is an indication that: municipal ?? A. interest rates are likely to fall B. interest rates are likely to rise C. dealers have a decreasing inventory position D. dealers have an increasing inventory position (C)

The Placement Ratio measures how well the market is absorbing the output of new bonds. A high Placement Ratio means that most of the new bonds are "being placed" or resold. A low ratio means that the market is not absorbing the bonds, therefore they are sitting on dealers' shelves.

The Revdex consists of: A. 20 revenue bonds with 25 years to maturity, rated A or better B. 25 revenue bonds with 25 years to maturity, rated A or better C. 25 revenue bonds with 30 years to maturity, rated A or better D. 25 revenue bonds with 35 years to maturity, rated A or better (C)

The Revdex consists of 25 revenue bonds with 30 years to maturity, all rated A or better.

The Visible Supply includes: I General Obligation Bonds II Revenue Bonds III Industrial Revenue Bonds IV Bond Anticipation Notes A. I only B. I and II C. I, II, III D. II, III, IV (C)

The Visible Supply includes all competitive bid and negotiated long term bond sales over the next 30 days; it does not include short term notes.

Which statements are TRUE regarding the weekly Treasury Bill auction? I The minimum non-competitive bid has no dollar limit II The minimum non-competitive bid amount is $100 III The maximum non-competitive bid has no dollar limit IV The maximum non-competitive bid amount is $5,000,000 A. I and III B. I and IV C. II and III D. II and IV (D)

The minimum non-competitive bid amount in the weekly Treasury Bill auction is $100; the maximum non-competitive bid amount is $5,000,000.

Which statements are TRUE regarding the procedures followed at the weekly Treasury Bill auction? I The minimum competitive bid amount is $100 II The minimum non-competitive bid amount is $100 III The maximum competitive bid amount is $5,000,000 IV The maximum non-competitive bid amount is $5,000,000 A. I and II only B. III and IV only C. I and III only D. II and IV only (D)

The minimum non-competitive bid amount in the weekly Treasury Bill auction is $100; the maximum non-competitive bid amount is $5,000,000. For competitive bids, the minimum is $5,000,000. There is no dollar maximum, although the Treasury imposes a maximum competitive bid limit per primary dealer of 35% of securities offered in any single auction.

The normal priority for handling municipal new issue orders is: A. Pre-Sale, Designated, Member, Group B. Group, Pre-Sale, Member, Designated C. Pre-Sale, Group, Designated, Member D. Designated, Group, Pre-Sale, Member (C)

The normal priority for handling municipal new issue orders is: Pre-Sale Net, Group Net, Designated Net, Member Takedown.

The selling concession in a municipal offering is the discount given to: A. syndicate members B. selling group members C. non members of the underwriting group D. financial institutions (B)

The selling concession is the discount given by the manager to the selling group members who place orders for the bonds.

A member of a syndicate is placing an order with the manager to purchase part of a new issue. The order is for an accumulation account being run by the dealer. The priority accorded to the order by the manager will be: A. Pre-Sale B. Group C. Designated D. Member related (D)

The syndicate member is placing an order for his own use - these bonds are not being placed with the general public. The syndicate member must disclose to the manager when bonds are being bought for an accumulation account run by the member or for a related portfolio (an account controlled by the member). These orders are last in line to be filled - so they get Member status. The normal priority for filling new issue municipal orders is Pre-Sale; Group; Designated; Member.

Which of the following statements are TRUE about new issue municipal selling practices? I The customer must receive a copy of the Final Official Statement if one is printed II The spread must be disclosed to the customer if the issue is competitively bid III If requested, the customer must receive the order priority provisions used by the manager IV The customer must receive a confirmation showing the purchase price A. II, III, IV B. I, II, III C. I, II, IV D. I, III, IV (D)

Under MSRB rules, a customer buying a new issue must receive a confirmation accompanied by a copy of the final Official Statement if one has been prepared. (If one has not been prepared by the issuer, there is no requirement to provide the document) If the customer requests, the order priority provisions must also be disclosed (Pre-Sale, Group, Designated, Member). Regarding spread disclosure, this is only required for negotiated underwritings - it is not required for competitively bid municipal underwritings.

A municipal syndicate is performing a negotiated underwriting of a revenue bond issue. The additional takedown is set at 1 point. The selling concession is 3/4 point. $1,000,000 of the bonds are placed by a selling group member. On this sale, the syndicate will earn: A. $1,750 B. $7,500 C. $10,000 D. $17,500 (C)

When a municipal syndicate member sells to the public, he earns the "total takedown", which is the total of the selling concession plus the additional takedown. In this case, the syndicate member does not earn the total takedown because the bonds were sold through a selling group member. Out of the total takedown of 1 3/4 point, a selling concession of 3/4 point is given up to the selling group member, leaving the syndicate with the additional takedown of 1 point = 1% of $1,000,000 = $10,000.

The spread on a new municipal offering is set at 3/4 point. The selling concession is 1/4 point and the additional takedown is set at 3/8 point. If a selling group member places an order for the bond, how much will the syndicate member earn on that sale? A. 0 B. 1/4 point C. 3/8 point D. 5/8 point (C)

When a municipal syndicate member sells to the public, he earns the "total takedown", which is the total of the selling concession plus the additional takedown. In this case, the syndicate member does not earn the total takedown because the bonds were sold through a selling group member. Out of the total takedown of 5/8 point, a selling concession of 1/4 point is given up to the selling group member, leaving the syndicate with the additional takedown of 3/8 point.

A hospital revenue bond issue is being underwritten on a negotiated basis. The offering consists of $100,000,000 par value of term bonds. The underwriter has agreed to a spread of $50.00 for each $5,000 bond. The manager has set the additional takedown at $20.00 per bond and the selling concession at $22.00 per bond. If a selling group member sells a $5,000 par value bond, the syndicate member earns: A. $0.00 B. $20.00 C. $22.00 D. $42.00 (B)

When a municipal syndicate member sells to the public, he earns the "total takedown", which is the total of the selling concession plus the additional takedown. In this case, the syndicate member does not earn the total takedown because the bonds were sold through a selling group member. Out of the total takedown of $42, a selling concession of $22 is given up to the selling group member, leaving the syndicate with the additional takedown of $20.

A waste disposal revenue bond issue is being underwritten on a negotiated basis. The offering consists of $10,000,000 par value of term bonds. The underwriter has agreed to a spread of $40.00 for each $5,000 bond. The manager has set the additional takedown at $15.00 per bond and the selling concession at $20.00 per bond. If a selling group member sells a $5,000 par value bond directly to the public, the selling group member earns: A. $5.00 B. $20.00 C. $35.00 D. $40.00 (B)

When selling a bond directly to the public, a selling group member earns the selling concession of $20.00.

Non-competitive bid

a bid that can be placed by individuals and secondary dealers at the weekly Treasury auctions, this type of bid does not specify a bid yield. The non-competitive bids are reserved out of the auction and are filled at the average yield of the winning competitive bids. Thus, non-competitive bids are assured of being filled.

Fixed UIT

a type of Unit Investment Trust under the Investment Company Act of 1940, in which a portfolio, usually containing one type of security (bonds), is set up and does not change - so the portfolio composition is fixed (hence the name). Units of the portfolio are sold to the public. Interest from the bonds held in the portfolio is distributed to the unit holders periodically. As the securities mature, or are called, the portfolio self-liquidates.

Revdex

a yield to maturity index published by the Bond Buyer, it is the average yield of 25 selected revenue bonds with 30 years to maturity, all rated A or better.

rights of accumulation

accumulated position counts towards breakpoint, based upon curr mkt value of the fund shares, not orig cost

investment adviser - mgmt fee

adviser earns mgmt fee based on %-age of all assets under mgmt (the more prestigious the adviser, the higher the annual fee); initially set for 2 years, subj to s/hhldr vote every year thereaft

Rule 12b-1

allows mutual funds to adopt a so called 12b-1 distr plan

Visible supply

also called the 30-day Visible Supply, the total dollar amount of long-term tax-exempt municipal bonds being issued in the primary market over the next 30 days via competitive bid or negotiated underwriting. The measure does not include short term municipal notes. Found in the Bond Buyer, this is a measure of new issue supply and is one of the references used to determine the coupon rate on a new long term municipal issue.

letter of intent

as further benefit, allowed to backdate letter to incl purchases in preceding 90 days and get the breakpoint on those shares; 13-month length / 90 day backdate; breakpoint can be met by asset appreciation

forward pricing

buy - does not know exact price at which will buy b/c purch price is computed at that day's closing NAV; sell - rec's that day's closing NAV

closed end fund one-time issuance - then shares trade

capitalized like any regular corp stock offering, u/w earning spread which is disclosed or if selling group, they are given a selling concession.

Investment Company Act of 1940

federal regulation administered by the SEC that defines the structure for investment companies (face amount certificate company; unit investment trust; or management company) and which sets the regulations under which the companies must operate.

12b-1 distr fees

fund is permitted to charge cost of soliciting new investment to existing shares as "12b-1 fees"; allows mutual funds to create shares w/ CDSC instead of up front sales charge - repres that sells them is compensated, gets 1/2 of .50% annually in form of trail commissions

class A

higher up-front sales charge, very low ~1/4% annual 12b-1 fees, most suitable for l-t investment

class B

impose contingent deferred sales charge that declines to "0", impose a higher ~1/2% annual 12b-1 fee, most suitable for intermediate investment

class C

impose no up front sales charge, rear load is smaller, have highest ~3/4% annual 12b-1 fees, suitable for short term investment

Group net order

in the underwriting of a competitively bid new issue municipal bond, an order that is placed for the benefit of the syndicate account (group account). Also known as syndicate group orders, these are filled after pre-sale orders.

special situations fund

invests in cos in bankruptcy or "takeover" candidates, can have lg capital gains potential

investment clubs cannot obtain breakpoints

many mutual fund "families" allow breakpoints t/b applied to all purchases w/in that family

Related portfolio

member related /Related portfolio a portfolio of securities that is controlled, directly or indirectly, by a member firm e.g. a mutual fund that is managed by a member firm.

index fund - matches its portfolio to compo of recognized index

mgmt fees are lower than for oth funds

Bond Buyer Index

published by the Bond Buyer, the index is the yield of 20 selected general obligation bonds with 20 years to maturity, all rated "A" or better.

Placement ratio

published on "The Numbers Page" at the back of The Bond Buyer, the portion of the total dollar amount of new issue bonds purchased by underwriters from issuers; that have been subsequently resold to the public. The ratio shows how well the market place is absorbing new issues.

breakpoints

reduced sales charge for a lg $ purch, m/b "fair and reasonable"

no discounts from POP oth than what is in prospectus

selling groups members are not allowed to discount mutual fund shares on their own, nor can they sell them for more than POP

Maximum Permitted 12b-1 Fee

the 12b-1 fee is not allowed to exceed .75% (¾ of 1%) of average annual net assets.

dividend reinvestment NAV / dividends are taxable - whether reinvested or not

there is no sales charge applied to reinvested distr

open end fund - continuously issued, redeemable

u/w can hire no of firms to form a selling group - sponsor gives up part of sales charge as selling concession; do not trade in secondary mkt; non-negotiable; Net Asset Value computed daily - "marked to market"; max sales charge is 8-1/2% of POP

pymt w/in 7 calendar days upon redemption

under Investment Co Act of 1940, usu shorter

custodian bank - safeguard assets of fund, earns custodial fees

usu acts as transf agent for fund, canceling old shares and issuing new shares, keeps shhldr list, for mailings of rpts, proxies and distr to shhldr

contingent deferred sales charge (CDSC)

where some funds impose a saled charge only if the cut redeems his shares before stated time period has elapsed

Series 7b

Related study sets

Chapter 16

Chapter 17

Fiscal and Monetary Policy Quiz

MS2 Quiz

Hematology Lab Final

2.4.1 Services Provided by DNS

Domain 7: Security Operations: Incident Management

PSYC 102 Test 4

Quiz: Taste Touch Smell

TTS4

Sociology - possible test questions

Growth and Development of the Adolescent

Marketing 3

Midterm Capstone

ATI Fundamentals Practice Quiz 1 - 10/06

Factors of Production

EA 1 Practice Questions

Chapter 8 Design Decisions

Animal Science Reproductive System

Chapter 25 Content Review