Series 50 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

MSRB Rule G-42 fiduciary duty

Rule G-42(b) imposes a federal fiduciary duty on a municipal advisor toward its municipal entity client, consisting of a duty of care and a duty of loyalty.

Duty of loyalty

Requires the municipal advisor to act in the client's best interest, avoid self-dealing, and eliminate or mitigate conflicts rather than merely disclosing them.

Duty of care

Requires professional competence, reasonable diligence, and a reasonable basis for every recommendation, including evaluation of alternatives, costs, and material risks.

Fiduciary duty to obligated persons

No fiduciary duty is owed to an obligated person under Rule G-42; the fiduciary duty runs to the municipal entity client, though fair dealing applies to all parties.

Rule G-20 gift limit

MSRB Rule G-20 limits gifts or gratuities given to any person in connection with municipal securities or advisory business to $100 per person per year.

Rule G-37 de minimis contributions

Contributions of up to $250 per election to officials the contributor may vote for, and $150 to other covered officials, are permitted; larger contributions trigger a two-year ban.

Written engagement requirement

Rule G-42(d) requires the municipal advisory relationship to be documented in writing before or at the time of engagement, stating services, fees, and conflict disclosures.

Engagement scope disclosure

The written engagement must state which services the advisor performs, whether it acts as a fiduciary, and whether a control-person relationship exists with the issuer.

Contingent compensation conflict

Fees payable only if a transaction closes create a conflict of interest that must be disclosed in writing and managed so that advice remains objective.

Documentation of recommendations

Advisors must keep records showing the analysis, alternatives compared, assumptions, and client communications that support each recommendation made to a client.

Updating conflict disclosures

Conflict disclosures must be given before or at engagement and updated in writing whenever a new actual or potential conflict arises during the relationship.

General obligation bond

A municipal bond secured by the issuer's full faith and credit, typically repaid from ad valorem property taxes and often requiring voter authorization before issuance.

Revenue bond

A municipal bond payable solely from a specified revenue stream such as utility rates or tolls, with no claim on the issuer's general taxing power.

Conduit financing

A structure in which the issuer lends bond proceeds to a private or nonprofit borrower that services the debt, with the issuer generally having no repayment obligation.

Arbitrage rebate requirement

Unless a spending exception applies, the issuer rebates to the U.S. Treasury earnings above the bond yield on nonpurpose investments, computed at least every five years and at maturity.

Rule 15c2-12 continuing disclosure

For offerings of $1,000,000 or more, the underwriter must obtain a written undertaking that the issuer will file annual financial information and event notices with EMMA.

Debt service coverage ratio

Pledged revenues divided by annual debt service; the indenture's additional bonds test sets the minimum ratio required to issue new parity debt.

Municipal financial product

Under MSRB rules, a municipal derivative, a guaranteed investment contract, or an investment strategy recommended to a municipal entity or obligated person.

Special entity under CEA

Municipal entities, pension plans, and endowments are special entities, so swap dealers owe heightened duties and must confirm independent representation before entering a swap.

Interest rate cap

An option for which the purchaser pays a premium and receives payments when a floating index exceeds the strike rate, hedging rising interest costs.

Interest rate swap

An agreement to exchange fixed-rate and floating-rate interest payments, used to alter the effective interest cost or duration of municipal debt.

Qualified hedge rules

Treasury Regulation Section 1.148-4(h) lets specified hedge payments be taken into account in computing bond yield when identification requirements are satisfied.

Municipal advisor definition

A person that advises a municipal entity or obligated person about municipal financial products or issuing municipal securities, or solicits such persons on behalf of another.

MSRB Rule G-42 scope

The core conduct rule for municipal advisors, covering fiduciary duty, fair dealing, conflict disclosure, documented engagements, and suitability of recommendations.

Form MA-I

The SEC form filed for each natural person who provides municipal advisory services on behalf of a registered municipal advisory firm.

Section 975 of Dodd-Frank

The provision that created the municipal advisor registration regime and led to fiduciary and conduct duties enforced through SEC rules and MSRB Rule G-42.

Rule 15Ba1-8 retention

SEC rule requiring municipal advisors to preserve books and records for five years, with the first two years kept in an easily accessible place.

Rule G-17 fair dealing

Prohibits municipal advisors from fraudulent, deceptive, or manipulative acts and requires disclosure of conflicts, compensation, and the scope of services provided.

MSRB Form A-12

The MSRB form completed by a municipal advisory firm and its associated persons to register with the MSRB before conducting municipal advisory business.

Series 50 qualification

The representative-level examination that qualifies an individual to provide municipal advisory services on behalf of a registered municipal advisory firm under MSRB rules.

Chief Compliance Officer, Rule G-44

The individual designated by a municipal advisor with authority to administer written supervisory and compliance policies and to oversee the annual compliance review.

Annual compliance review

A documented review, required at least annually, of the adequacy of a municipal advisor's compliance policies and procedures, with identified deficiencies remediated.