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51 Cards in this Set
- Front
- Back
Securities exchange act of 1933 |
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 |
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What securities are exempt from registration of the Securities exchange act of 1933? |
Anything that is issued from the Fed Gov, Munis and things issued by banks and credit unions |
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Securities Exchange act of 1934 |
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 |
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FINRA |
An SRO (self regulating agency) that brokers-dealers must be registered to exclusion: those who only do munis |
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What are taxable munis? |
Aka Private activity bonds They fund private activities that are backed by government |
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Securities Act amendments of 1975 |
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 |
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What is the Municipal Securities Rulemaking Board? |
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 |
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Composition of the MSRB |
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 |
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Five Rule Areas of the MSRB |
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 |
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Dodd Frank |
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 |
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What were the financial regulatory agencies created by Dodd Frank designated to do? |
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 |
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Amendments and Exchange act Section 15b |
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 |
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Written Supervisory Procedures |
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 |
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IRMA exemption |
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 |
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RFP exemption |
Allows advice when responding to an RFP |
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Exemptions and Exclusions for Registering as a Municipal Adviser |
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 |
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Bank exemption |
Banks can give advice about commercial banking accounts (PP, LOC, Direct loans, indenture trustee) |
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Series 9/10 |
Muni securities sales principal |
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Series 27 |
Financial and Operations Principal |
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Series 50 |
Municipal Adviser Representative |
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Series 51 |
Municipal Fund Securities Limited Principal |
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Series 52 |
Municipal securities Representative |
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Series 53 |
Municipal Securities Principal |
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Antifraud Regulations |
(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 |
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Unfair practice in municipal securities (G 17) |
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. |
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Records that need to be kept for a lifetime |
1. records associated with the foundation of the firm (example minutes from partners and directors meetings) |
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6 year minimum records |
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 |
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Blotters |
Daily record for purchase and sale of securities, certificates and other Debits and Credits |
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General Ledger |
Records all Assets and Liabilities, income and expenses |
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Custom Ledger |
Itemize cash and margin account of every customer (including debits and credits) |
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Securities Record |
Aka stock record, info on the owner and physical location of every stock held by the firm |
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Customer account information |
Maintain info on all customer accounts and updates to them, 6 years after account closes |
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Rule G-20 |
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) |
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Rule G-42 |
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 |
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Prohibitions of G-42 |
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) |
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Inadvertent advice under G-42 |
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 |
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G-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 |
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G-37 Ban on business |
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 |
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G-37 De minimis exception |
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 |
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G-37 Look back provision |
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 |
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Municipal Adviser Representatives |
Associated persons engaged in municipal advisory activities (not including clerical or ministerial functions) |
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Municipal advisor solicitors |
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) |
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Municipal advisor principals |
principals who manage Municipal Advisor Representatives |
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Dealer supervisory chain persons |
any associated persons who supervise a municipal advisor principal, up to and including the CEO |
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Who is Considered a Map? |
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) |
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non-MAP executive officer/ non-MFP executive officer |
is an executive who does not supervise any municipal advisor professionals/municipal finance professionals. |
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Municipal finance professionals (MFPs) include: |
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 |
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Municipal finance representatives |
associated persons engaged in municipal securities activities, other than retail sales |
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Dealer solicitors |
associated persons who solicit business from municipal entities on behalf of a dealer |
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Municipal finance principals |
municipal securities principals who manage municipal securities representatives or dealer solicitors |
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Dealer supervisory chain persons |
any associated persons who supervise a municipal finance principal, up to and including the CEO |