Chapter 1

Front 1

Securities exchange act of 1933

Back 1

Aka the Paper Act (because things are disclosed on Paper)

1. Companies must publicly disclose relevant financial info and company info prior to sale of securities (initial offering)

2. Goal is to prohibit fraud and deceit

Front 2

What securities are exempt from registration of the Securities exchange act of 1933?

Back 2

Anything that is issued from the Fed Gov, Munis and things issued by banks and credit unions

Front 3

Securities Exchange act of 1934

Back 3

Aka the Peoples act because it regulates the people

This is for the secondary market

1. includes trading laws like insider trading

2. allows security exchanges (NYSE) to regulate themselves as long as they are still registered with the SEC

3. Created SEC

4. Requires brokers and dealers to register with FINRA

Front 4

FINRA

Back 4

An SRO (self regulating agency) that brokers-dealers must be registered to exclusion: those who only do munis

Front 5

What are taxable munis?

Back 5

Aka Private activity bonds They fund private activities that are backed by government

Front 6

Securities Act amendments of 1975

Back 6

1. Any Broker-dealer, firm, or bank that work in munis are required to register with SEC

2. While munis are exempt from registration, they are now not exempt from anti-fraud regulation (now muni issuers are required to disclose material info)

3. SEC is given authority enforcement and rule making over muni broker dealers

4. Created the MSRB

Front 7

What is the Municipal Securities Rulemaking Board?

Back 7

1. Created by the Securities amendment of 1975

2. An SRO to regulate the muni security market

-Not given enforcement authority, they just write the rules

-They are subject to oversight by the SEC

Front 8

Composition of the MSRB

Back 8

Composed of 21 members (serving 4 year terms)

1. 11 public reps independent of industry

2. At least one must: a) be an institutional or retail muni investor b) rep a muni entity c) knowledgeable member of the public

3. Of the 10 regulated at least a) 1 non-bank broker dealer b) one bank dealer c) one muni advisor

Front 9

Five Rule Areas of the MSRB

Back 9

1. Rules that make sure broker dealers are competent

2. Fair practice rules to protect investors and munis from fraud and encourage cooperation in the industry

3. Uniform practice that provide for arbitration claims

4. Market transparency rules assuring fair and informative market quotations and development of information systems

5. Admin rules set internal requirements for firms, like record keeping

Front 10

Dodd Frank

Back 10

Aka Wall Street Reform and Consumer Protection Act

1. Passed in 2010 post financial crises

2. Created new financial regulatory agencies

3. Included the amendments and exchange act section 15b

Front 11

What were the financial regulatory agencies created by Dodd Frank designated to do?

Back 11

1. Monitor and limit too big to fail

2. prevent predatory lending

3. control banks who could threaten the financial system

4. Provide regulations to increase transparency in muni market

Front 12

Amendments and Exchange act Section 15b

Back 12

1. Separate released report from Dodd Frank, that showed munis had been taken advantage of and their role in the Financial Crisis

2. Gives MA's fiduciary duty

3. MA are now subject to same rules as municipal security dealers

4. Amendments are to prevent a) Pay to play b) undisclosed conflict of interest c) giving advice without being qualified d) not being a fiduciary

Front 13

Written Supervisory Procedures

Back 13

Rules that FA firms must have in place to insure compliance

1. Must establish policies to test and modify procedures

2. At least one annual compliance review

3. Must have a compliance officer

Front 14

IRMA exemption

Back 14

A market participant can give advice to a muni if the muni has engaged an Independently Registered MA that gives them advice on the same thing

Front 15

RFP exemption

Back 15

Allows advice when responding to an RFP

Front 16

Exemptions and Exclusions for Registering as a Municipal Adviser

Back 16

1. IRMA Exemption

2. RFP Exemption

3. Bank Exemption

4. Registered Swap Dealer Exemption

5. Accountant exemption

6. Municipal entities and their employees exemption

7. Underwriter exclusion

8. Registered investment advisor exclusion

9. Attorney exclusion

10. Engineering exclusion

11. Commodity trading advisor exclusion

Front 17

Bank exemption

Back 17

Banks can give advice about commercial banking accounts (PP, LOC, Direct loans, indenture trustee)

Front 18

Series 9/10

Back 18

Muni securities sales principal

Front 19

Series 27

Back 19

Financial and Operations Principal

Front 20

Series 50

Back 20

Municipal Adviser Representative

Front 21

Series 51

Back 21

Municipal Fund Securities Limited Principal

Front 22

Series 52

Back 22

Municipal securities Representative

Front 23

Series 53

Back 23

Municipal Securities Principal

Front 24

Antifraud Regulations

Back 24

(A lot of the rules are in the 1933 and 1934 acts)

1. Don't be manipulative or deceptive

2. Unlawful to profit from untrue statements or by omitting material facts

3. Can't defraud or deceive the purchaser of the security

4. Can't create false of misleading impression of the active trading of a security

5. Fraud in connection with securities transactions

6. No insider trading

7. Must disclose conflicts of interest

Front 25

Unfair practice in municipal securities (G 17)

Back 25

1. Must disclose all relevant materiel info in making an investment decision

2. Brokers-dealers must implement things to ensure that material info about the securities is distributed to registered reps.

Front 26

Records that need to be kept for a lifetime

Back 26

1. records associated with the foundation of the firm (example minutes from partners and directors meetings)

Front 27

6 year minimum records

Back 27

1. If FINRA, MSRB or Exchange act don't specify for a record, the default is to keep it for 6 years

2. blotters

3. General Ledger

4. Custom ledger

5. Securities Record

6. Customer Account information

Front 28

Blotters

Back 28

Daily record for purchase and sale of securities, certificates and other Debits and Credits

Front 29

General Ledger

Back 29

Records all Assets and Liabilities, income and expenses

Front 30

Custom Ledger

Back 30

Itemize cash and margin account of every customer (including debits and credits)

Front 31

Securities Record

Back 31

Aka stock record, info on the owner and physical location of every stock held by the firm

Front 32

Customer account information

Back 32

Maintain info on all customer accounts and updates to them, 6 years after account closes

Front 33

Rule G-20

Back 33

Limitations on gift giving for broker dealers and MA

<= $100 higher of cost or market

exceptions include sports/events tickets if the MA accompanies, things that bear the MA logo, deal toys, and personal gifts on special occasions (weddings)

Front 34

Rule G-42

Back 34

Duties of a non-solicitor municipal advisor

1. Standard of conduct for MA's with Munis (Duty of care and Duty of loyalty)

2. Disclosure of Conflicts of interest

3. Documentation of MA relationship

4. Suitability of Recommendations Requirements

5. Know your client requriement

Front 35

Prohibitions of G-42

Back 35

1. Can't be paid exesivly

2. can't give false info

3. Can't fee split with an underwriter

4.

5. Can't engage in a Principal transaction if MA is registered broker dealer (ex, the MA buys or sells a security from the muni)

Front 36

Inadvertent advice under G-42

Back 36

Don't have to do disclosures and other documentation if...

1. You have given a statement that the MA did not mean to give advice and will stop

2. Statement saying did not disclose conflicts of interest

3. List of advice provided

4. Receipt of the document

Front 37

G-37

Back 37

Regulations on Pay-to-play aka political contributions

1. 2 year ban

2. De minimis exemption

3. Look back provisoin

4. Ban on business

5. No bundling

6. Circumvention of the rule

Front 38

G-37 Ban on business

Back 38

Cross ban: a company that is both MA and sec dealer will experience ban on both sides of business if they receiver is influential on both sides

Front 39

G-37 De minimis exception

Back 39

If you can vote in the election you can give $250 per candidate per election ($250 for primary and $250 for general)

This rule is for individuals not firms

Front 40

G-37 Look back provision

Back 40

1. No ban if MFP or MAP was not an MFP or MAP at the time and they became one for the sole purpose of being a solicitor

2. A supervisor who is only MAP or MFP because he is supervisor and donation was <6 month prior to becoming MFP or MAP

Front 41

Municipal Adviser Representatives

Back 41

Associated persons engaged in municipal advisory activities (not including clerical or ministerial functions)

Front 42

Municipal advisor solicitors

Back 42

associated persons who solicit business from municipal entities on behalf of the municipal advisor (or a dealer in the case of a third-party solicitor)

Front 43

Municipal advisor principals

Back 43

principals who manage Municipal Advisor Representatives

Front 44

Dealer supervisory chain persons

Back 44

any associated persons who supervise a municipal advisor principal, up to and including the CEO

Front 45

Who is Considered a Map?

Back 45

1. Municipal Advisor Representatives

2. Municipal advisor solicitor

3.Municipal advisor principals

4. Dealer supervisory chain persons

5.Members of a dealer’s executive or management committee (i.e. municipal advisor executive officers)

Front 46

non-MAP executive officer/ non-MFP executive officer

Back 46

is an executive who does not supervise any municipal advisor professionals/municipal finance professionals.

Front 47

Municipal finance professionals (MFPs) include:

Back 47

1.Municipal finance representatives

2.Dealer solicitors

3.Municipal finance principals

4.Dealer supervisory chain persons

5. Members of a dealer’s executive or management committee

Front 48

Municipal finance representatives

Back 48

associated persons engaged in municipal securities activities, other than retail sales

Front 49

Dealer solicitors

Back 49

associated persons who solicit business from municipal entities on behalf of a dealer

Front 50

Municipal finance principals

Back 50

municipal securities principals who manage municipal securities representatives or dealer solicitors

Front 51

Dealer supervisory chain persons

Back 51

any associated persons who supervise a municipal finance principal, up to and including the CEO