Series 52 flashcards

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

General obligation bond

A municipal bond secured by the issuer's full faith, credit and unlimited taxing power, payable from general revenues rather than from the income of a specific project.

Revenue bond

A municipal bond payable solely from the revenues of a designated facility or project; holders have no claim on general tax revenues or the issuer's full faith and credit.

Serial bonds

Bonds of a single issue that mature in installments on successive dates, with principal amortized over the life of the issue rather than paid at one final maturity.

Term bonds

Bonds of one issue carrying a single maturity date, usually retired through a sinking fund that redeems a scheduled portion of principal each period.

Additional bonds test

A revenue bond covenant limiting issuance of new parity debt unless historical or projected project revenues cover total debt service by a stated minimum ratio.

Debt service reserve fund

A fund holding cash or a surety equal to roughly one year of maximum annual debt service, providing a cushion if project revenues fall short of requirements.

Private activity bond

A tax-exempt municipal bond whose proceeds are used substantially by private parties and whose debt service is secured by private payments; volume cap applies.

Capital appreciation bond

A municipal bond that pays no current interest but accretes at its coupon rate, paying a compounded lump sum at maturity and carried at accreted value.

EMMA

The MSRB's Electronic Municipal Market Access system, where issuers file official statements and continuing disclosure and where reported municipal trade prices are displayed publicly.

Accrued interest convention

Municipal bonds accrue interest on a 30/360 basis from the last coupon date to settlement, and the buyer remits that accrued amount to the seller.

Mark-up disclosure

On a principal trade with a retail customer, the dealer must disclose on the confirmation the difference between its cost and the price charged.

Yield to worst

The lowest yield an investor can receive given the bond's call schedule, computed as the lesser of yield to maturity and the yield to each call date.

Municipal-to-Treasury ratio

The yield on a municipal bond divided by the yield on a Treasury of comparable maturity, used to evaluate whether municipals are cheap or rich across maturities.

Duration

A measure of a municipal bond's weighted average time to cash flows and its price sensitivity, where price change approximates minus duration times the yield change.

Bid wanted

A secondary market request in which a dealer asks other dealers to submit bids on a block of municipal bonds that it is trying to sell.

Rule G-15 confirmation

The MSRB rule requiring customer confirmations to show security description, price, yield, accrued interest, call features, capacity and mark-up on retail principal trades.

Official statement

The primary offering document for a municipal issue, disclosing the issuer, security pledge, financial information and risk factors, and delivered to purchasers by the underwriter.

Rule 15c2-12

The SEC rule requiring an underwriter to obtain a continuing disclosure undertaking from the issuer before bidding on or purchasing municipal securities in an offering.

Notice of sale

The published announcement for a competitive sale stating the maturity schedule, bid requirements, good faith deposit and the time and place bids will be opened.

True interest cost

An award method computing the discount rate that equates all debt service payments to the actual offering price plus accrued interest, used to rank competitive bids.

Gross spread

The underwriter's total compensation on a new municipal issue, comprising the management fee, underwriting fee, selling concession and takedown.

Good faith deposit

Cash or a certified check submitted with a competitive bid, typically about 2% of par value, forfeitable if the winning bidder fails to pay for the bonds.

Debt service coverage ratio

Projected net revenues of a revenue-bond project divided by total annual debt service; covenants commonly require coverage of 1.25 to 1.50 times.

Feasibility study

A consultant's report projecting demand, revenues and operating costs for a proposed revenue bond project, typically summarized in the official statement.

MSRB Rule G-37

The rule barring a dealer from engaging in municipal securities business with an issuer for two years after a political contribution to an issuer official.

Rule G-17 fair dealing

The MSRB rule requiring dealers to deal fairly with all persons, disclose material facts about transactions and refrain from deceptive or misleading practices.

Rule G-19 suitability

The MSRB rule requiring dealers to have reasonable grounds, based on customer information, that a recommended municipal securities transaction is suitable.

Rule G-30 fair pricing

The MSRB rule requiring dealers to buy and sell municipal securities at prices reasonably related to prevailing market value and to disclose certain charges.

Rule G-32 disclosure

The MSRB rule requiring underwriters to deliver the final official statement to customers and to submit issue documents to the MSRB through EMMA on time.

Rule G-42

The MSRB rule imposing standards of conduct on municipal advisors, including a fiduciary duty to issuer clients and written disclosure of conflicts of interest.

Series 52 license

The MSRB representative-level qualification that permits a person to engage in municipal securities sales, trading and underwriting activities on behalf of a dealer.

Rule G-14 reporting

The MSRB rule requiring dealers to report executed municipal securities transactions to the Real-Time Transaction Reporting System within 15 minutes of execution.