FINRA Series 54 - Pauline - Quiz 9.new
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Question 1 of 10
1. Question
Which of the following information must be seen in a document provided to a municipal entity in an event that the municipal advisor inadvertently engages in such activities?
I. An identification of the advice that was inadvertently provided on a reasonable investigation.
II. A notification that such municipal entities are ignorant about the disclosure of material conflicts of interest.
III. A request that the municipal entity or obligated person have acknowledged the receipt of the document.
IV. A disclaimer that it is not the intention of the municipal advisor to provide advice.Correct
In an event that the municipal advisor engaged inadvertently in municipal advisory activities, he or she must provide a document to the municipal entity which includes the following: (1) a disclaimer that the municipal advisor did not intend to provide advice, (2) a notification of municipal entity about its awareness of the disclosure of material conflicts of interest, (3) an identification of all of the advice that was provided inadvertently, and (4) a request that the municipal entity acknowledged the receipt. However, it is not a requirement for municipal advisors to comply with other requirements under the MSRB Rule G-42 if they already met the requirements beforehand.
Incorrect
In an event that the municipal advisor engaged inadvertently in municipal advisory activities, he or she must provide a document to the municipal entity which includes the following: (1) a disclaimer that the municipal advisor did not intend to provide advice, (2) a notification of municipal entity about its awareness of the disclosure of material conflicts of interest, (3) an identification of all of the advice that was provided inadvertently, and (4) a request that the municipal entity acknowledged the receipt. However, it is not a requirement for municipal advisors to comply with other requirements under the MSRB Rule G-42 if they already met the requirements beforehand.
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Question 2 of 10
2. Question
Which of the following are included in the facts “essential” to “knowing a client” under the MSRB Rule G-42?
I. Act in accordance with any special directions from the client
II. Effectively service the broker-dealer and third-party relationship with the client
III. Understand the authority of each person acting on behalf of the client
IV. Comply with the applicable laws, regulations, and rulesCorrect
In knowing the client and the essential facts, the following must be included: (1) effectively service the municipal advisory relationship with the client, (2) act in accordance with any special directions from the client, (3) understand each person’s authority on behalf of the client, and (4) to comply with the laws, regulations, and rules. A municipal advisor must provide reasonable diligence to know every fact about their client and the authority of each person acting on behalf of their client.
Incorrect
In knowing the client and the essential facts, the following must be included: (1) effectively service the municipal advisory relationship with the client, (2) act in accordance with any special directions from the client, (3) understand each person’s authority on behalf of the client, and (4) to comply with the laws, regulations, and rules. A municipal advisor must provide reasonable diligence to know every fact about their client and the authority of each person acting on behalf of their client.
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Question 3 of 10
3. Question
Which of the following are the exceptions for transactions in specified fixed income securities?
I. If the account exercises no investment discretion except granted by a municipal entity client on a temporary basis.
II. Either the municipal advisor or its affiliates provide advice to the municipal entity client as to an issue of municipal securities related to the principal transaction.
III. The principal transaction is a sale to the municipal entity client of any agency or corporate debt security.
IV. The principal transaction is a purchase from the municipal entity of any agency or corporate debt security that does not involve municipal escrow investments.Correct
Under the MSRB Rule G-42, engaging in a principal transaction with a municipal entity client is not specifically prohibited if: (a) the account of municipal advisor does not exercise investment discretion except if this discretion is granted by municipal entity client on a temporary basis, (b) neither the municipal advisor nor affiliate has provided such advice, (c) the principal transaction circulates around any agency or corporate debt security, and (d) it does not involve any escrow investments. It is also an exception if the municipal advisor discloses the capacity in which the municipal advisor obtains the consent of municipal entity clients in certain transactions.
Incorrect
Under the MSRB Rule G-42, engaging in a principal transaction with a municipal entity client is not specifically prohibited if: (a) the account of municipal advisor does not exercise investment discretion except if this discretion is granted by municipal entity client on a temporary basis, (b) neither the municipal advisor nor affiliate has provided such advice, (c) the principal transaction circulates around any agency or corporate debt security, and (d) it does not involve any escrow investments. It is also an exception if the municipal advisor discloses the capacity in which the municipal advisor obtains the consent of municipal entity clients in certain transactions.
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Question 4 of 10
4. Question
Which of the following situations done by the municipal advisor are under the exception for transactions in specified fixed income securities?
I. If both the municipal advisor and its affiliates are the issuer of the security at the time of sale.
II. If the municipal entity client has executed consent to authorize the municipal advisor to act principally on its own account in selling securities.
III. If the municipal advisor informs the municipal entity of the capacity of such transaction and obtains consent from the municipal entity client.
IV. If the municipal advisor sends written confirmation of each transaction disclosing the fact that he may be acting in a principal capacity.Correct
The abovementioned statements are exceptions for transactions in specified fixed income securities except for the first statement as it requires neither the municipal advisor nor its affiliates to be the issuer of the security at the time of sale. Nevertheless, it would not be included in the exception. If a municipal advisor discloses to the municipal entity client the capacity in which the municipal advisor is obtaining the consent of the municipal entity client to the transaction, it would also be considered an exception in specified fixed income securities.
Incorrect
The abovementioned statements are exceptions for transactions in specified fixed income securities except for the first statement as it requires neither the municipal advisor nor its affiliates to be the issuer of the security at the time of sale. Nevertheless, it would not be included in the exception. If a municipal advisor discloses to the municipal entity client the capacity in which the municipal advisor is obtaining the consent of the municipal entity client to the transaction, it would also be considered an exception in specified fixed income securities.
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Question 5 of 10
5. Question
Which of the following statements are correct regarding the “relationship documentation” provided in the MSRB Rule G-42?
I. The writings in this rule shall be amended to reflect material changes and must be delivered to the client.
II. The amendment applies to any changes and additions that are discovered based on the exercise of reasonable diligence by the municipal advisor.
III. Inadvertently engagements shall provide documents to a municipal entity or obligated person that is dated.
IV. The municipal advisor must deal honestly with a municipal entity client regarding the financial interests of other advisors.Correct
Statements I and II describe the “relationship documentation” provided in the supplementary material of MSRB Rule G-42. It must be promptly delivered to the client once the writing is amended to reflect material changes. Material changes include any additions with the transaction. These changes would reflect the basis of the reasonable diligence by the municipal advisor.
Incorrect
Statements I and II describe the “relationship documentation” provided in the supplementary material of MSRB Rule G-42. It must be promptly delivered to the client once the writing is amended to reflect material changes. Material changes include any additions with the transaction. These changes would reflect the basis of the reasonable diligence by the municipal advisor.
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Question 6 of 10
6. Question
Which of the following best describes an agency debt security as described under the MSRB Rule G-42?
Correct
A debt security that is issued or guaranteed by an agency, or by a government-sponsored enterprise is an “agency debt security” as described under the MSRB Rule G-42. On the other hand, corporate debt security is a security issued by a foreign private issuer and is a U.S. dollar-denominated security. The agency debt security includes a securitized product issued by an agency or government-sponsored enterprise wherein the principal or interest is guaranteed by them.
Incorrect
A debt security that is issued or guaranteed by an agency, or by a government-sponsored enterprise is an “agency debt security” as described under the MSRB Rule G-42. On the other hand, corporate debt security is a security issued by a foreign private issuer and is a U.S. dollar-denominated security. The agency debt security includes a securitized product issued by an agency or government-sponsored enterprise wherein the principal or interest is guaranteed by them.
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Question 7 of 10
7. Question
Which of the following statements are related to the money market instrument under the Supplementary Material of MSRB Rule G-42?
Correct
The money market instrument means securities issued with a maturity of one calendar year or less. If a discount note issued by an agency or government-sponsored entity, it would have a maturity of one calendar year and one day or less. Corporate debt security which is restricted security, would not include a money market instrument.
Incorrect
The money market instrument means securities issued with a maturity of one calendar year or less. If a discount note issued by an agency or government-sponsored entity, it would have a maturity of one calendar year and one day or less. Corporate debt security which is restricted security, would not include a money market instrument.
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Question 8 of 10
8. Question
In which of the following are securitized products be collateralized under the MSRB Rule G-42?
Correct
Securitized products are collateralized by any type of financial asset. This financial asset includes a loan, a lease, a mortgage, or a secured or unsecured receivable. The secured or unsecured receivable includes asset-backed security, synthetic asset-backed security, and any residual tranche or interest of any security specified aboce. The tranche or interest is considered debt security.
Incorrect
Securitized products are collateralized by any type of financial asset. This financial asset includes a loan, a lease, a mortgage, or a secured or unsecured receivable. The secured or unsecured receivable includes asset-backed security, synthetic asset-backed security, and any residual tranche or interest of any security specified aboce. The tranche or interest is considered debt security.
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Question 9 of 10
9. Question
Which of the following is provided by the MSRB under the Rule G-42, Duties of Non-Solicitor Municipal Advisors in Conduit Financing Scenarios?
Correct
As mentioned in the Rule G-42, Duties of Non-Solicitor Municipal Advisors in Conduit Financing Scenarios, it is provided by the MSRB the core standards of conduct for municipal advisors that engage in municipal advisory activities. There are certain scenarios to discuss a municipal advisor’s relationships with a municipal entity issuer, an obligated person, or both.
Incorrect
As mentioned in the Rule G-42, Duties of Non-Solicitor Municipal Advisors in Conduit Financing Scenarios, it is provided by the MSRB the core standards of conduct for municipal advisors that engage in municipal advisory activities. There are certain scenarios to discuss a municipal advisor’s relationships with a municipal entity issuer, an obligated person, or both.
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Question 10 of 10
10. Question
What should be the first broad principle to be noted as mentioned in the interpretation of MSRB Rule G-42?
Correct
Large universities and institutions that are often conduit borrowers have the freedom to choose to issue debt securities directly even without involving the municipal entity issuer. If there is a private placement “tail” side-by-side with the issuance of tax-exempt municipal security, the advice may have an impact or consequences for the municipal advisor regarding the negotiations and other activities related to the non-municipal entity.
Incorrect
Large universities and institutions that are often conduit borrowers have the freedom to choose to issue debt securities directly even without involving the municipal entity issuer. If there is a private placement “tail” side-by-side with the issuance of tax-exempt municipal security, the advice may have an impact or consequences for the municipal advisor regarding the negotiations and other activities related to the non-municipal entity.