Series 52 cheat sheet

General obligation bonds pledge the issuer's full faith, credit and taxing power; revenue bonds are payable only from designated project revenues and carry no claim on general taxes.

Serial bonds mature in installments on successive dates; term bonds have a single maturity and are usually retired through a sinking fund that redeems stated principal amounts periodically.

Standard revenue bond covenants include an additional bonds test, a rate covenant and a debt service reserve fund funded at roughly maximum annual debt service.

Short-term notes are named by repayment source: TANs (taxes), RANs (revenues), TRANs (tax and revenue), BANs (bond anticipation) and GANs (grants).

Certificates of participation are lease-backed obligations subject to annual appropriation, so they are not general obligations even when the leased facility is essential.

Private activity bonds must fit within state volume caps; interest on specified private activity bonds is an alternative minimum tax preference item for individual holders.

Bank-qualified status requires the issuer to project no more than $10 million of tax-exempt issuance in the calendar year and lets banks deduct interest carrying cost.

Redemption features to review include optional calls (par or premium), mandatory sinking fund calls and extraordinary calls for casualty or condemnation; each can lower yield to worst.

Capital appreciation bonds accrete interest and pay no current coupon, while variable rate demand obligations reset periodically and give holders a tender right backed by a liquidity facility.

Municipal securities trade in a dealer over-the-counter market; customer confirmations must show capacity (agency, principal or riskless principal), price, yield and accrued interest.

Price and yield move inversely; dollar price change is approximately negative duration multiplied by the yield change, and basis point value is the price change per 0.01% move in yield.

Accrued interest on municipals uses a 30/360 day count, runs from the prior coupon date to settlement, and is paid by the buyer to the seller; regular settlement is T+1.

Yield to worst is the lower of yield to maturity and the yield to each call date; premium callable bonds are quoted and compared on a yield-to-worst basis.

The municipal-to-Treasury ratio equals the municipal yield divided by the Treasury yield of comparable maturity; a rising ratio indicates munis are cheapening versus Treasuries.

On principal trades with retail customers, dealers must disclose the mark-up over the prevailing market price under MSRB Rules G-15 and G-30.

Executed trades are reported to the MSRB Real-Time Transaction Reporting System within 15 minutes and displayed publicly on EMMA.

Effective duration is used for bonds with embedded options because it allows expected cash flows to change as yields and the curve change.

Secondary market terms: a bid wanted solicits bids from other dealers, an offering is a quote to sell, and a workout is a block that fails to attract an acceptable bid.

Competitive sales use a published notice of sale, a good faith deposit (commonly about 2% of par) and award to the bidder submitting the lowest true interest cost.

True interest cost discounts all debt service payments at the actual purchase price plus accrued interest; net interest cost uses a simple average coupon and ignores time value.

Gross spread equals management fee plus underwriting fee plus selling concession plus takedown; the reallowance is the concession offered to dealers outside the syndicate.

In a negotiated sale the underwriter assists with structuring and pricing and the preliminary official statement is circulated before the order period.

SEC Rule 15c2-12 requires the underwriter to obtain a continuing disclosure undertaking before bidding; the issuer then files annual financial information and event notices.

Debt service coverage equals net revenues divided by annual debt service; revenue bond rate covenants commonly require 1.25x to 1.50x coverage.

Feasibility analysis examines the economic base, demographics, competing facilities, projected demand and rate-setting flexibility to test revenue projections.

Debt burden indicators include debt per capita, debt as a percentage of assessed valuation and debt as a percentage of personal income.

Capitalized interest held in the construction fund pays debt service during construction, and a debt service reserve fund typically holds one year of maximum annual debt service.

The MSRB writes rules for dealers and municipal advisors; the SEC oversees and approves MSRB rulemaking and FINRA enforces MSRB rules against its member firms.

MSRB Rule G-37 prohibits municipal securities business with an issuer for two years after a dealer or covered associate makes a political contribution to an issuer official.

Rule G-19 requires reasonable grounds for suitability of recommendations; Rule G-30 requires prices reasonably related to prevailing market value.

Rule G-32 requires underwriters to deliver the final official statement to customers and to submit issue documents to EMMA within the prescribed deadlines.

Municipal advisors owe a fiduciary duty to issuer clients under Rule G-42 and may not serve as underwriter on the same issue.

Rule G-20 limits gifts and gratuities to $100 per person per year, and Rule G-21 governs municipal securities advertising and sales literature.

Rule G-14 mandates real-time trade reporting; Rule G-6 requires records to be preserved for six years, the first two in an easily accessible place.

Representative and principal qualifications: Series 52 for dealer representatives, Series 53 for dealer principals, Series 50 for municipal advisor representatives, Series 54 for municipal advisor principals.

Municipal issuers are exempt from registration, but antifraud liability under Section 10(b) and Rule 10b-5 still applies to issuers, advisors and dealers.