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223 Cards in this Set
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What are the first two steps to issue municipal securities
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The issuer must first obtain a legal opinion which determines whether and how the bonds may be offered. The second step is seating the terms of the bond which may be done by negotiation or competitive bidding
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What does the municipality do as one of its first steps in negotiated underwriting
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The municipality appoints an investment banker to underwrite the offering
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What is not included in the official notice of sale issued in competitive bidding
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The bonds yield as and the underwriters name because they have not yet been determined. The notice of sale contains the size, the majority, and the coupon rate
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What are the names of publications that offer information on new issues and secondary market activity 4 municipal
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The Bond Buyer an Thompson Muni news
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What is the visible supply and when it is small what does that indicate
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The visible supply is the total dollar amount of new issues scheduled over the coming 30 days. It does not include municipal notes. When the visible supply is small, it indicate that interest rates likely to fall.
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What is the daily bond buyer 40 bond index the 20 bond index 11 bond index and the revdex25
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40=daily price index of 40 GOs with avg 20 yr mat
20=weekly20 GOs with 20 yr mat rated A or better 11=11 from 20 bond index rated AA or better revdex 25=weekly 25 revenue bonds with 30 yr mat A or better |
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Which municipal publication provides the most up to the minute information on secondary municipal bonds
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Thompson Muni Market Monitor
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Which municipal publication includes the 30-day visible supply index
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The bond buyer
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What is a syndicate
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An account that helps the spread risk of underwriting an issue among a number of underwriters
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When are syndicate letters legally binding
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Only after a firm has submitted a bid
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What is an Eastern syndicate account
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The eastern account have both undivided liability when purchasing the bonds from the issuer and undivided responsibility for the bonds that remain unsold. Note the West is divided
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What is the meaning of the term writing a scale
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Scale refers to yield by maturity. The scale of yields can be converted into dollar prices to allow underwriters to calculate a bid for an issue Writing the scale is first determining what prices or yields are necessary in order to be able to sell the various serial maturities and then backing off a little to arrive at a bid
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When are syndicate account settled
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30 calendar days after the issuer delivered the securities to the syndicate therefore the maximum length of time for this syndicates to exist is 30 calendar days
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What is the total takedown
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Concession plus additional takedown
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What are the allocation priority orders for municipal bond
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Pro golfers don't miss
Normal priority is presale order; 2) group order 3) designated orders; and 4) lowest priority --group member order and member related orders |
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Who signs the syndicate agreement
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All members of The Syndicate including the managing underwriter. It is not signed by the issuer, bound counsel or the trustee
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What is the most important item considered by an issuer when evaluating competing bids
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Net interest cost. Net interest cost measures an issuer overall cost of borrowing for a particular bond issue
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What is the dated date for a municipal bond
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The date on which interest begins to accrue
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What is the debt statement
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Used in the analysis of GO debt. It includes the estimated value of taxable property, the estimated assessed value of property and the assessment percentage
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How do you calculuate a municipality's net total debt
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Calculate total debt Less self supporting debt and sinking funds. Equals net direct debt then add overlapping debt which is disclosed on the debt statement the result is net total debt
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What is not included in the various categories on the debt statement
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Any category that uses the word net, self-supporting debt, and sinking fund accumulations are not included
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What is the flow of funds
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The order in which the issuer pledges to pay expenses on a revenue bond. In most cases a net revenue pledge is you mean that operating and maintenance expenses are paid first
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What is the gross revenue pledge flow of funds method
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Debt service is paid first
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What is the debt service ratio
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Divide net revenue by debt service. Service includes both interest and principal repayment
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What type of income can be used to go bonds
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All fees and taxes that are payments received by a municipality that are not the result of a revenue producing facility
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What document would a customer examine to evaluate the credit quality of a new muni
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The official statement. it discloses material information on new issues of municipal securities. It must include the location of the trust indenture and a statement that bond holders may review it if they choose
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What are two agencies that ensure Munis
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National Public Finance guarantee Corporation and AMBAC
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How are dollar bonds quoted
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percentage of par. Dollar bonds are usually term bonds callable before maturity
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How are municipal bonds quoted
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Municipal bonds maybe quoted on a dollar basis or on a yield to maturity
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What is a bonafide quote
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It is not necessarily the best price but it must have a reasonable relationship to fair market value. it is a firm quote
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What is a nominal quote or subject quote
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A dealers estimate of a securities market value provided for informational purposes only
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What is a workable indication quote
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It reflects a bid price at which a dealer will purchase securities from another dealer and can be revised
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What is a key provision of the secondary market joint or trading account
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A joint account, when selling the bonds, can only give one quote for the bonds. In other words all participants must sell the bonds at the same price
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Muni trades with other dealers must be reported to what Corporation
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National security Clearing Corporation. NSCC
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What is the antireciprocal rule
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A dealer can not solicit trades in return for sale
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What must a municipal dealer disclosed to its customers with regards to relationships
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Any control relationship it may have with the security issuer
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the msrb requires what yield to be shown on the customer's confirmation
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The lower of ytc or ytm. For discount bond the lower YTM. For premium the lower is ytc
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What are the three cases where no separate yield disclosure is required
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variable rate bonds, bonds in default, bonds sold at par
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When will the Muni not be granted tax exemption
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If a Muni Bond channels more than 10% of its proceeds to private parties, it is considered a private activity bond and is not granted tax exemption
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Who is the only organization that can deduct cost associated with Go bonds and how much
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Bank may deduct 80% of the interest carrying cost of the deposits funding the purchase of go bonds
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Who has the authority to enforce the MSRP rules
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FINRA, FDIC, comptroller of currency and FRB
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What is Emma
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Electronic Municipal Market Access and centralized online site to locate information about muni security. It is a dataport where muni underwriters and issuers submit official statements and continuing disclosures
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What government securities are exempt from federal income tax
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muni
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The MSRB does not regulate who?
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Issuers. Rather it regulates the underwriting of municipal securities a subsequent secondary market trading
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What is described in the agreement among underwriters or The Syndicate agreement
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The rights duties and commitments of the syndicate members with respect to the securities being underwritten. And appoints the Syndicates manager. It does not include the legal opinion or appointment of bond counsel
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in what form are new munis issued
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Newly issued bonds are either registered or book they are no longer in bearer form nor registered as to principal only
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What is the Muni debt limit
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The maximum amount of debt a municipality can have outstanding
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What is the name of the discount that nonmembers of a syndicate buy Muni
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Concession
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What are the two components of total takedown
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Concession and additional takedown. The total take down is that portion of the municipal underwriting spread that remains after the underwriting manager takes the management fee.
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What are the responsibilities of a municipal finance professional mfp
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An associated person of a broker-dealer who is primarily engaged in municipal securities representative activities other than retail to individuals, who solicits muni security business for the broker dealer, or who is in the supervisory chain above MFPs
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What does the legal opinion of a new municipal attest
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Tax-exempt status and legality
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A bond that is a general obligation, is secured by ad valorem taxes, and has specific pledged revenues underlying payment of principal and interest is called
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Double barreled bond
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When can European style options the exercise
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Only on the business day preceding expiration
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What is the order period for a Muni
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The order period is the short period of time following the award of a Muni issue to the winning syndicate. During the order period, orders for an issue of Muni are allocated in accordance with the priority defined in the syndicate letter
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How long does the MSRB require firms to retain abstracts of official statement
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3 years
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When is the public attitude important in evaluating a muni
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When the Muni is a go
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A dealer that quote a concession of 1\2 basis point to another dealer is what qty of money
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$5 per 1,000 of par
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Who is exempt from the guidance of MsRB or any other sro
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Issuers of municipal or municipal fund securities are exempt issuers. MSRB guides both banks and broker dealers
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What is a GAN
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Grant anticipation note
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in a bond quote, what would P/R @ 102 mean
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P/R means pre- refunded. these bonds would be rated AAA
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Under MSRB rules what is the maximum amount of business related gratuities and gifts that a registered representative may give to one person per year
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$100
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Who is never a part of a syndicate or joint account
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The issuing municipality
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Where will you find the flow of funds for a Muni
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In the bond contract (trust indenture). the bond contract is more expansive document then bond resolution. The bond resolution contains a description of the issue. The trust debenture serves as a contract between the bond issuer and a trustee appointed on behalf of the bond investors and is too long to supply to all bond holders
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What is generally the reason that a secondary market joint account is formed for marketing
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The block size
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How is the official statement for a muni bonds like a prospectus
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It is used to sell the bond and it is required to be delivered to purchasers at or before settlement. It serves as a disclosure document contains material information an investor might need about the issue
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What are ARS
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Auction rate securities, Long-term(29-30 years) variable rate securities issued by Municipality. Interest rates are reset using a Dutch auction to reset interest rate at short term intervals (7, 28 or 35 days). The reset rate is known as the clearing rate and establishes the rate paid during the period following the auction. If auction fails, ARS holders may not have immediate access to their funds
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What is the acceptance or placement ratio
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It's compiled weekly and reflects the municipal bonds sold divided by bonds offered in the previous week
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What is the debt service ratio
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Net income before payment of interest and principal divided by the amount paid for interest and principal
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When is payment due on a when issued municipal bonds
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The order can be taken now but payment is not due until 3 business days after the bond is available from the issuer also called regular way settlement
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What is missing on the initial confirmation of a when issued municipal bond
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since the final settlement date is not known, there is accrued interest is missing because interest is payable up to but not including the settlement date. In addition, the total dollar amount is not known because the total includes the unknown accrued interest. Only the number of bonds purchased and the yield to maturity or price are known and must be included in the confirmation.
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what is the scale or reordering scale
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A list of prices and/or yields at which new issue securities will be offered for sale to the public by the underwriter. The syndicate uses the scale to determine its bid on the issue
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Who has the final responsibility for the debt service on an industrial revenue bond bond
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Corporation leasing the facility. The net lease payments by the corporate user of the facilities are the source of the revenue for debt service
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What is the focus of municipal bond analyst
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The financial aspects of municipal bonds to ensure that they do not default. Various financial ratios and collection records are critical to their analysis.
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Who is the national public finance guarantee corporation end AMBAC (american municipal bond assurance corporation)
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The folks that insure municipal general obligation bonds
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Statutory debt limits apply only to
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General obligation bonds
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What is the bond buyers revenue bond index, REV DEX
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The bond buyer's revenue index is an average yield of 25 revenue bonds with 30 years to maturity
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What is a municipal finance professional, MFP
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And its so cute of a broker-dealer engage in municipal securities representative activities, other than retail sales. These activities can include the solicitation of municipal bond business.
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What information must be disclosed on a municipal bond confirmation of sale
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In whole call date, source of revenue backing for a municipal revenue bond, name of the guaranteeing corporation in industrial development revenue bonds
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May a registered representative in a discretionary account exercise discretion when a control relationship exists between the issuer and the dealer
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Not without first receiving the customer's permission
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A customer's confirmation for municipal callable bond callable at par and quoted yield is higher than the nominal yield would show
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Yield to maturity. Because the quoted yield is higher than the nominal yield the bond is offered at a discount. The lower of yield to maturity or yield to call is the bond yield to maturity
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A dealer that closed a concession of 1\2 basis point to another dealer means
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$5 per 1000 of par. A concession between broker dealers on secondary market transactions is a discount from the yield that the broker dealer is quoting. It is common for the broker dealer to offer bonds to other broker dealers at price less the concession. The net price becomes the purchase price for the buyer broker dealer. If simultaneously sold to a retail account, the markup is from the net price paid. If not simultaneously retailed but held in the broker dealer inventory, it is fair for the broker dealer to market his inventory and mark up from there for retail sale
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The flow of funds Relates only to
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Municipal revenue bonds. It describes the priority of dispersing revenues from the projects.
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The MSRB rules that require uniformity of business practices by municipal dealers may be altered by a mutual agreement between the dealers except for
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The rules regarding the content of confirmation
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What is net overall debt of a municipality
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Net overall debt of a municipality is defined as net direct debt + overlapping debt
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What is a Dutch auction rate
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The lowest bid rate at which all bonds can be reset, or sold for new issues, at par
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What is the reoffering yield on a new municipal bond issues
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It is the yield at which the bonds are offered to the public. In a competitive bidding situation, each underwriter submits a sealed written bid. Once the bid has been awarded, the bonds are repriced to give the underwriters a profit when selling them to the public. The yield at which the bonds are sold is called the reoffering yield
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What happens in a negotiated municipal underwriting
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The municipality appoints investment banker or broker dealer to underwrite the offering. The underwriter works with the issuer to establish the interest rate and the offering price in light of the issuer's financial needs and market conditions.
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What does the official notice of sale publicize
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The issuer's name, the bond Council's name, and the amount of good faith deposit required. The Notice of Sale is the advertisement placed by a municipality soliciting bids from underwriters for an issue it wishes to sell. It does not include the bonds rating
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What is included in the trust indenture of a revenue bond
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The insurance covenant and the maintenance covenant. the rate covenant, revenue pledge and application of flow of funds. All can be found in the trust indenture
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What is the maximum political contribution allowed under MSRB rules for those eligible to vote in the municipality issuing debt on a negotiated basis
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$250
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What is in the bond contract
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The bond contract describes the nature of the contract and issuer duties to the bondholders. It is a more expansive document then the bond resolution. The contract is comprised of the bond resolution, or trust indenture,and other security agreements and laws in force at the time of bond issuance
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The dollar price used to compute the yield to call must be recorded on the confirmation of what type of callable municipal bond
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Callable premium bond quoted on a yield basis. The yield computed to the near term in the whole call is used . The confirmation shows the call date and call price at the expected maturity
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What does an underwriting bid for a municipal GO issue include
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The dollar amount of the bid, the amount the issuer will receive, and the coupon rate.
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Lease back arrangements can be used to secure a security for
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Revenue bonds, called lease rental bonds, are secured by a lease back arrangement.
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What is a group net order
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When a bond is in high demand, syndicate members may designate their orders as group net orders to give them a better chance of getting filled and thus share commission with members of The Syndicate. The sales credit for those orders is shared by members of the syndicate, based on their participation. The entire sales credit less the management fee is deposited in the syndicate account.
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What is the role of the municipal brokers broker
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Acting as agent only, they generally purchase and sale securities on an anonymous basis for institutional clients. They are not in the business of making a market and they maintain no inventory
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In a competitive bid, what does this issuer need to determine the net interest costs
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The coupon rate and price
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What is important to the underwriters in terms of pricing a competitive bid
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The spread in basis at which the bonds will be resold are important to the underwriters but not to the issuers
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What should be considered in analyzing the credit worthiness of a revenue bond issuer
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Debt service coverage and the personnel in charge of managing the facility are important.
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The initial confirmation of a when issued municipal bond contains
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The number of bonds involved in the transaction and yield to maturity. The final settlement date is not now therefore the accrued interest is on known. The total dollar amount is unknown because it includes accrued interest
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Municipal bond quotations between dealers are required to be of what type
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Bona fide or firm quote. They are required to be fair and reasonably related to the current market
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Provide an example of a taxable municipal bond
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Build America Bonds, BABs, are municipal issues created under the Economic Recovery and Reinvestment Act of 2009 to assist in reducing costs to issuing municipality and to stimulate the economy. There are two types, direct payment BABs that provide the municipal issuer with payments from the US Treasury, and tax credit or issuer BABs that provide the bondholders with a federal income tax credit
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With respect to municipal discretionary accounts what must principal
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A principal must approve all transactions in the account promptly after execution. All activity must be reviewed at frequent intervals by a principal. Unless a customer give their authorization, the broker-dealer cannot affect transactions to the customer's account for securities in which it has a controlling relationship
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An official statement has a date of March 1, but the first interest payment is October 15th. This most likely reflects
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This is a long coupon, and after the first payment, subsequent payments will be made every six month
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How do all states require G O and revenue bonds to be underwritten
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There is no requirement that either municipal GO or revenue issues be underwritten as either negotiated or competitive bid. Each may be underwritten using either underwriting process
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When must the additional bonds test be met under the provisions of a revenue bond indenture
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The additional bonds test must be met under the provisions of a revenue bond indenture before additional bonds with an equal lien on project revenues can be issued. The conditions under which additional bonds maybe issued are specified in the bond indenture.
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State issued municipal are backed by what usually
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State revenues, including sales and income taxes as well as these first date issued licenses and permits. States do not normally levy property taxes.
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What is the coverage ratio
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It is specific to revenue bonds only and tells how many times annual revenue from that issue will cover the debt service of the issue.
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What is a municipal variable rate demand obligation
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It has interest payments tied to the movement of a specific interest rate. Because the coupon rate of the bond changes with the market, the price of a variables rate demand obligation tends to remain stable
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Under MSRB rules what is a control relationship
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A control relationship exists when a broker-dealer controls, is controlled by, or is under common control with the issuer of the security
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What Muni is funded by General tax receipts
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Tax anticipation note, TAN. Municipalities issue TANs to raise funds immediately. The community expect general tax revenues to generate the necessary funds to pay off the note. RANs are eventually funded by revenues other than tax receipts. And BANs are funded through the sale of bonds
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MSRB does not make rules concerning what
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Information provided by municipal issuers. That is under the Security and Exchange Act of 1934
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The MSRB makes rules concerning what
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The dissemination of price and yield quotes by municipal dealers. Municipal dealer record keeping. Dealers obtaining fair and reasonable prices for customers.
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What is a nominal quote
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The approximate price reflects the current market value with no bid or offer provided for information purposes only
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At what price do members of the syndicate buy bonds
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Offering price minus the takedown
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At what price do non members of a syndicate buy bonds
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At the offering price minus a concession
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Moody's investment grade (MIG) ratings are applied today
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Municipal notes. Which are short-term municipal notes such as bond anticipation notes
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What is a the spread
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The Spread, or underwriters compensation, on a competitive bid underwriting is the difference between the bid to the issuer and the dollar price at which the underwriter offers the bonds to the public. It is the difference between the syndicate bid and the offering price on a competitive bid
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Interest on municipal short term notes is paid
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At maturity. They are short term money market instruments
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What is the true interest cost method
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Net interest cost (NIC) is a way to compute interest expense for a bond issue. It equals total net interest costs divided by the number of bond-year dollars. TRUE NIC(aka present value)discounts future interest payments to arrive at a present value. You could see this method in a notice of sale in the Bond Buyer, that an issue or states that it will take into consideration the timing of interest
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What is the acceptance or placement ratio
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new issues sold versus new issues offered for sale the prior week.
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Where are protective covenants find found
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They are found in the trust indenture of a revenue bond.
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What order are distributions paid under a net revenue pledge
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First operation and maintenance. Second the debt service account. Third the debt service reserve account. And last the surplus fund
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Why is a notice of sale published
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To provide syndicates with information needed to prepare a bid, including the amount of the good faith deposit The Syndicate must bid submitted with the bid.
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When is a firm commitment used
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For new municipal bond issues underwriters must submit bids for the entire bond offering
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When is a standby commitment used
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Only for corporate stock right offerings.
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What does the MSRB require when a call date has been fixed by a pre refunding,
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the yield to call is fixed so it must be reflected on the confirmation statement. Because of the pre refunding, this bond issue will be called at the call date. There is no uncertainty surrounding this event. Therefore it is appropriate to price the bond to the call date as the old maturity on the bond has no significance
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What can be found within the bond covenant
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A statement explaining the rates or user fees will be maintained at a level sufficient to cover the debt service and operating expenses for the bond issue
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Why do anticipation notes have the least market risk
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They are the shortest term
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MSRB be rules require you to do what for insured bonds
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Provide the client with some proof of that insurance, either on the band itself or in the case of book entry delivery as a separate document
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What type of Muni bond might subject the holder to alternative minimum tax
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Industrial Development bonds. They are private purpose bond
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What does the 30 day visible supply published in the daily Bond Buyer contain
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general obligation and revenue municipal bonds expected to be offered in the next 30 days. It does not include short-term anticipation notes
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Bonds subject to a gross revenue pledge, the first priority will be to
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Bond interest and principal. Bond subject to a gross revenue pledge our bad by the gross revenues of the facility meaning revenues before expenses. In this case the first money dispers is for payment of interest and principal
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What information is found in the bond buyer
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11, 20, and 40 bond indexes for bonds with 20-year maturities, REV Dex, the 30 day visible supply, the placement ratio
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What are certificates of participation, cops
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COP are considered revenue issues and do not require voter approval. They are a form of lease revenue bonds that allow the holders of the certificates to participate in a revenue stream, lease or loan payments, associated with land, equipment or facilities purchased by the municipality.
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How are COPs unique
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Certificate of participation are unique in that in the case of default, the holders of the COP could foreclose on the asset associated with the certificate
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The MSRP 15 requires a confirmation to include
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The customer's name, trade and settlement date, coupon rate and maturity, and the yield to maturity or yield to call, whichever is lower, the firm's capacity (agent or principal), and commission on agency trade , whether prefunded, The current yield is not included
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What document sets forth the priority of sale of securities
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The Syndicate letter. It lists the terms under which members will conduct the sale of the bonds. It also describes each members sharing of profits and expenses, the type of business entity and the good faith deposit required
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What is the bond buyer Rev Dex
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The Bond Buyer Rev Dex is computed weekly just like the bond buyer's go index. The Rev Dex consist of 25 revenue bonds with 30 year maturity. The GO index includes 20 bonds, each with approximately 20 years to maturity
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The visible supply has been increasing steadily over the last 30 days. This is an indication that
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You are likely to rise. When the visible supply increases the number of my bond issues coming to market is increasing. Greater supply put you downward pressure on the prices. As the bonds fall, interest rises
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Is a person is serving as a clerical capacity in a broker dealer firm what is required
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A 90-day apprentership is required under g3. This person will be required to pass a series 52 or series 7
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How much is each basis point worth for muni
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10 dollars.
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What is the block size
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The denomination of the bonds in the block. It does affect marketability. A block trade involves a significantly large number of bonds being treated at an arranged price between parties
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Register representatives attempting to close a large municipal bond sale. Customer voices concern about a potential increase in interest, what can the representative do
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Sell the customer a put or entering into a repurchase agreement . MSRB prohibit permit the sale of a bona fide put option or repurchase agreements to customers by municipal security dealers.
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What is a separately identifiable division within a bank that conducts municipal securities business such as underwriting or sales, acting as either an agent or a principal
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A municipal securities bank dealer
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How are hospital revenue bonds usually backed
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By the revenues generated by hospital operations and sometimes a special tax levy as a supplemental source of debt coverage
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When a bond issue is pre funded what yield must be quoted
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Yield to call. When a bond is prefunded, the issuer is going to redeem the bond on the first call date
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According to MSRB rules, a municipal securities dealer participating in a secondary market account can sell a quantity of bonds exceeding its participation in a joint account, can respond to quotes inquiries with nominal quotations that are clearly indicated as such, can charge a mark-up of more than 3 percent. What is it prohibited from doing
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They are not allowed to distribute quotes relating to the securities in the account that indicate more than one market for the same security
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Who must give prior written approval for municipal securities sales advertisement used as communications with the public
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The firm's municipal securities principal
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The expenses associated with purchasing or holding municipal bonds are not deductible. However, the exception is when banks purchased certain issues of municipal GO bonds (bank qualified) for which the rules allow the banks to deduct what percentage of interest carrying cost
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80%
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MSRB rule G13 titled, " Quotations relating to municipal securities,' applies to the distribution or publication of
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Quotations, requests for offers, bids or offers, indications of this wanted. It applies to all quotations on distributed or published municipal securities. It covers multiple markets in the same security
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What are some of the revenue issues protective covenants
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Rate or fee (promise to maintain user fees high enough to pay expenses and debt service), maintenance, insurance, additional bonds test, sinking fund, catastrophe, flow of funds, books and records, and call or put features
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What is the bond resolution
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The document that authorizes the issuance of a municipal bond. The resolution also describes the proposed issue's features and the issuer's responsibilities to its bond holders
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A municipal dealer can enter into transactions with a mutual fund such as accepting orders from a fund to buy a municipal issue; acting as a broker's broker for large block of bonds the mutual fund wishes to sell, purchasing the mutual fund's shares to fill customer orders. What are they prohibited from doing
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Reciprocal dealing between a broker dealer and investment company is prohibited reciprocal dealing is accepting portfolio trades from the funds as compensation for sale of the funds shares
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What is the indenture
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The indenture is the agreement between the issuer and the bond trustee that sets forth how the debt will be retired
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How are municipal dollar bonds quoted
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Dollar bond quotes are based on a percentage of face amount of $1k. Therefore a quote of 85 1\2 is .855 percent of $1000 or $855 . Dollar bonds are also called term bonds
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How can a town raise money to build a new city hall
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a bond anticipation note period will raise money now for ground preparation. The notes maturity will be set so that it can be paid off with the proceeds from the bond sale
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In real property assessment 1 mill equals
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1/1000 or .001. However first apply the percentage of property that will be taxed. you may have to ADUST mil by mill rate, I.e. 10 mils=.01
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What are ad valorem taxes
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Taxes that are attached to values such as real estate. They are usually used to support general obligation bonds. However GOss can be backed by sales taxes, income taxes, gasoline taxes, license fees, fines and assessments
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A city has issued bonds to construct a new sewage treatment facility. If the bonds are not backed by the full taxing authority of the city, what may be true about the bond issue
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The bonds issued will mature with the useful life of the sewage plant, there is no debt limitation on the issue, if the earnings fall short of the amount needed to make principal and interest payments, the debt service reserve can be used
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What is a balloon maturity
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A balloon maturity is distinguished by the presence of serial maturities in the years immediately preceding the maturity which contains a disproportionately large percentage of the principal amount of the issue
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What yield should be shown on the confirmation if the basis yield is higher than the coupon rate
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When the basis yield is higher than the coupon rate, the bond is being bought at a discount. Because yield to maturity on a discount bond is lower than the yield to call, the yield to maturity is shown on the confirmation
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A syndicate member in a municipal underwriting wishes to place an order for its own portfolio with the manager . Under MSRB rules, an order for a related portfolio must be
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disclosed to the manager. Disclosure is necessary to allocate orders. An order for a related portfolio will be accorded member status, the lowest priority
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What is the issuer's obligation on a moral obligation bond
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Issuers' have the moral but not legal, obligation to service the debt. If a moral obligation bond goes default, bondholders do not have the right to sue to force a tax to pay off the bonds. The only way bondholders can recover the principal is through legislative apportionment
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What are special tax bonds and what taxes are never used to support them
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Special tax bonds are supported from the proceeds of specified income generators such as gasoline, cigarettes, liquor, and business licenses Ad valorem taxes such as real estate taxes can never be used to support special tax bonds
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What is the maximum length of time a new issue municipal bonds syndicate can exist
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30 calendar days after the issuer delivers the securities to the syndicate. At that time the account must be settled and allocation of unsold bonds be determined in accordance with each member's original allocation and whether the syndicate was set up as Western or Eastern
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What is a closed end indenture
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Under a closed end indenture all additional bonds issued against the same stream of revenues have junior claims to those already outstanding. These additional issues are also known as junior lien bonds
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Gifts exceeding $100 may not be given by municipal securities representative to
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A customer, a municipal securities employee of another dealer, a treasurer for an issuer of municipal securities. There are no restrictions on giving gifts to colleagues employed by the same firm
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The 5% markup policy does not cover
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Exempt securities
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What must a member firm acting in a principal transaction (selling municipal bonds out of its inventory) when determining the markup
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the total dollar amount of the transaction .
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On a principal transaction what need not be disclosed on a confirmation
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The markup
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What is the usual sequence of order allocation
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Pre-sale, syndicate, designated, member at the takedown
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When is a bond delivered without the legal opinion attached considered good delivery
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If it was trading ex legal, meaning no legal opinion was ever rendered
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What competitive bid on a new municipal issue is most likely to be awarded the bid
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In a competitive bid bond sale, the winning bid is the 1 that provides the issuer with the lowest cost. If the syndicate pays the issuer more than the par for the bonds, the issuer is taking in more money then it must pay out at maturity. Therefore the lowest interest with the highest premium is most likely to be awarded the bid
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What net debt to assessed valuation is considered reasonable for a municipality
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5%
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Per MSRB rule G16 municipal broker dealer must be examined at least once every
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2 years
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Per MSRB rule G37 how long is a municipal firms prohibited from engaging in municipal securities business with an issuer after having made a political contribution
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2 years
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Per MSRB rule G39 telemarketers calling on behalf of a firm may not call a person during what hours
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Before 8 in the morning or after nine at night in the person's time zone
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Who are the selling group members
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A group of investment bankers who assist a syndicate in the sale of new security but are not part of the syndicate. They purchase bonds from the syndicate at the concession and then sell the bonds to the public at the offering price
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What is the official statement
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It is a disclosure document. It takes the place of a prospectus and has to be distributed to investors. It identifies the issues purpose, the source from which the interest and principal will be repaid information regarding the issuer's financial and economic background and information relating to the issue's credit worthiness and contains info about the new issue and issuer.
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What is tombstone advertisement
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advertises issue, shows amount, purpose, date, bond counsel, underwriter counsel,-- must be approved by municipal principal prior to first issue
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What is an out firm quote
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A quotation that a dealer is committed to honor, usually for a set period
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What is a locked market
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When dealer bid price is equal to the dealer offering price
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What is a crossed market
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When the bid is higher than the market price
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What is the visible supply
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Published in the Bond Buyer, reflects the total dollar volume of bonds expected to reach the market over the next 30 days, gives supply side indication
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The municipal market data yield curve
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Yield curves of the highest rated AAA municipal bond
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What did the Securities Act Amendments of 1975 do
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Required dealers participating in municipal securities transactions to be registered with the SEC, created MSRB and shared authority of transfer agents with SEC. Also called national exchange market system act (NEM)
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Per MSRB, a bank that has a separately identifiable department engage in municipal securities is classified as a
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municipal securities dealer
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Who qualifies as a municipal securities representative
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Any person who gives financial advice to municipal securities issuers or investment advice to investors.
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What exams must be passed in order to be a municipal securities representative
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Series 7 or series 52
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How large must mandated fidelity bonds be as required by the MSRB rule G 6
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It is dependent upon the SRO to which you belong and varies based on your firm's size. Banks are exempt from this rule
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When is a reclaimed form submitted
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When a buyer accepts the delivery of a security but then finds that the bonds are not in good delivery status
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When securities do not meet the delivery requirements what happens
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The trade isn't cancelled. The seller is still required to make the sale
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In what Denominations are bearer bonds delivered
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Denominations of $1,000 and $5,000
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In what Denominations are registered bonds delivered
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Multiples of $1000 par value with a maximum par value on any one certificate of $100,000
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Municipal securities without legal opinions are
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Not considered good delivery unless it is specified on the trade date that the transaction is ex legal
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Dealers can publish quotations only for
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Bona fide bids or offers
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No dealer participating in a joint account may distributing quotation indicating more than
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1 market for that security
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Each municipal broker-dealer must be examined at least once every two years to ensure
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That the firm is in compliance with MSRB, sec
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Can an advertisement of a new issue show the original offering price even if it might have changed
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Yes assuming the advertisement contains the sale date
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What is required in order to enact a trade when a controlling relationship is present
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Verbal disclosure is required before the trade is affected, with written disclosure following no later than at the time of the confirmation
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Can a firm acting as a financial advisor participate in a negotiated bid
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No. The advisor contract must be terminated in writing and the issuer must give written consent. HOWEVER for a competitive bid, the advisory contract need not be terminated. The issuer however must consent to the underwriters participation in writing.
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When must the designated supervising principal for a firm approve something in writing
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The opening of a new customer account, every municipal securities transaction, complaints, correspondence regarding trades
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The mark up or mark down that a municipal securities dealers charge must be fair and reasonable, taking into account what characteristics of the trade
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Fair market value of securities, dollar amount, any special difficulty,
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When a new issue of municipal securities is delivered to a customer, what document must accompany or proceed the delivery
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The official statement
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In a negotiated new municipal security offering what must be disclosed if the issue is still in underwriting (with respect to competitive and non competitive bidding)
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Is in underwriting, the firm must disclose in writing to the customer the amount of the spread, the amount of any fee received if the firm acted as an agent in the sales, and the initial offering price for each it in the issue. In a competitive bid the firm has no requirement to disclose the spread
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If a municipal securities firms has offered a political contribution to an official of the issuer, how long after the contribution is the firm prohibited from engaging in municipal securities business with an issuer
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2 years. And contributions are limited to two hundred and fifty dollars for election
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What must a municipal telemarketer disclose to the caller
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The firm's name, telephone number or address, and the fact that he is calling to solicit the purchase of municipal bonds or investment services
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What is a negotiated sale
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An issuer will select a lead underwriter who will sell these to the public. Size, coupon, provisions and other factors are negotiated in this decision
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What is a competitive sale
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An issuer may invite all interested underwriters to submit bids on the issue. The best bid is awarded the bonds
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What is the relationship between the call premium and time
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Call premiums tends to decrease over time. The longer a customer to hold the bond and receive interest the less of a premium an issuer will pay to take away the bond before maturity.
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What is the main advantage of a variable rate municipal bond
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A variable rate bond has no fixed coupon rate. The coupon is tied to a market rate and subject to change at regular intervals. Because the interest paid reflects changes in the overall interest rates, the bond price remains relatively close to par.
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Why is state government debt least likely to be overlapping
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States do not generally tax real estate
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The difference between the syndicated bid and the reoffering price on a competitive bid of a new municipal underwriting is called
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The spread, or underwriters compensation. In a competitive bid underwriting the spread is the difference between the bid to the issuer and the dollar price at which the underwriter reoffers the bond to the public
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Between for the concession and total takedown dollar amounts of a municipal underwriting spread from the largest to the smallest are in which order
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Spread, total takedown, concession . The spread is the entire amount. Total takedown includes the concession.
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What is the order period in municipal underwriting
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It is a short period of time following the award of a municipal issue to the winning syndicate. During the order period, orders for an issue of municipal bonds are allocated in accordance with the priority defined in the syndicate letter, not on a first come first served basis
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Sets the margin requirements exempt securities
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The firm's SRO or DEA, designated examining authority
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What securities act amendments established record keeping requirements for municipal broker dealers and created regulations for participants in the municipal securities secondary market
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Security acts amendments of 1975
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What is a SLGS
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State and local government series securities are purchased by municipal issuers, which are subject to IRS yield restrictions when they invest the proceeds of a pre funding.
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What is a municipal variable-rate demand obligation
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It has interest payments tied to the movements of a specified interest rate. Because the coupon rate of the bond changes with the market the price of the demand of Legation tends to remain stable
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What is a bank qualified municipal issue
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One that receives preferential treatment by allowing a bank to exclude from income 80% of the interest expense incurred to issue
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What is a bond resolution
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That document that authorizes the issuance of a municipal bond. It also describes the proposed issues features and the issuers responsibilities
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What is the official statement for a new municipal issue
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It is a disclosure document. It includes information about the call provisions of the bond, credit worthiness of issuer and other information potential purchasers should know
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