Series 51 cheat sheet

Municipal fund securities include interests in 529 college savings plans, ABLE programs, and local government investment pools (LGIPs).

529 savings plan contributions are not federally tax-deductible; qualified withdrawals are federal income tax-free, while nonqualified withdrawals tax earnings plus a 10% penalty.

ABLE accounts are tax-advantaged accounts for individuals with disabilities with onset before age 26; qualified disability expenses are tax-free.

LGIPs pool local government cash; they seek a stable net asset value but are not FDIC insured and can lose value.

529 plans are sponsored by states or state agencies; program managers handle investments and administration; distributors and broker-dealers sell interests.

Direct-sold plans are bought without a commissioned advisor; advisor-sold plans use share classes with sales charges and distribution fees.

Prepaid tuition plans purchase tuition credits or units; savings plans invest contributions in portfolios selected by the account owner.

The plan disclosure document or program description describes fees, investment options, risks, tax treatment, and withdrawal rules.

MSRB Rule G-19 requires recommendations of municipal fund securities to have a reasonable basis and to be suitable for the customer's objectives, risk tolerance, time horizon, and tax situation.

For 529 recommendations, relevant factors include beneficiary age, account owner's tax bracket, state tax benefits, liquidity needs, and tolerance for market risk.

MSRB Rule G-17 prohibits deceptive, dishonest, or unfair practices and requires fair dealing and disclosure of material conflicts.

MSRB Rule G-21 requires advertising and sales literature to be fair and not misleading; a principal must approve and records must be kept.

MSRB Rule G-15 requires confirmations to disclose sales charges, compensation, and that municipal fund securities are not FDIC insured and may lose value.

MSRB Rule G-20 limits gifts and gratuities; generally no gift over $100 per person per year.

MSRB Rule G-37 restricts dealer business after political contributions to issuer officials; pay-to-play rules can apply to state-sponsored 529 plans.

Marketing comparisons must be balanced; performance data must not imply guaranteed results, and MSRB approval cannot be claimed.

MSRB Rule G-44 requires written supervisory procedures for municipal fund securities reasonably designed to achieve compliance with MSRB rules and securities laws.

Rule G-44 requires at least an annual compliance review and designation of a municipal fund securities limited principal (Series 51).

MSRB Rule G-27 requires supervision of representatives, including review of transactions, correspondence, and customer complaints.

MSRB Rule G-8 specifies books and records to be made; MSRB Rule G-9 requires preservation, generally six years with the first two easily accessible.

MSRB Rule G-3 requires qualification before engaging in municipal fund securities activities; Series 52 for representatives and Series 51 for limited principals.

Customer complaints must be documented and responded to; supervisory procedures must include complaint handling and escalation.

Advertising and correspondence must be reviewed and approved by a principal; records of approvals must be retained.

Supervision must cover outside activities, gifts, political contributions, and AML/OFAC compliance.

The MSRB is a self-regulatory organization with SEC oversight; it writes rules for municipal securities dealers, brokers, and municipal advisors.

Securities Act Section 3(a)(2) exempts municipal securities, including municipal fund securities, from SEC registration.

Exchange Act Section 15B requires municipal securities dealers to register with the SEC and comply with MSRB rules.

MSRB Rule G-44 is the primary supervision rule for municipal fund securities; it requires written procedures, annual review, and a designated principal.

MSRB Rule G-19 suitability applies to municipal fund securities; SEC Regulation Best Interest also applies to retail recommendations.

MSRB Rule G-32 requires disclosure in primary offerings; for municipal fund securities, the program disclosure document must be delivered.

MSRB Rule G-15 confirmation disclosure for municipal fund securities includes sales charge and non-FDIC-insured status.

MSRB Rule G-37 pay-to-play and Rule G-20 gift limits apply to municipal fund securities distribution.