Series 54 flashcards

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

MSRB

Municipal Securities Rulemaking Board: the self-regulatory organization created by Exchange Act Section 15B that writes rules for dealers and municipal advisors. The SEC approves its rules, and enforcement is by the SEC, FINRA and bank regulators.

Series 54 registration

Qualifies an individual as a Municipal Fund Securities Limited Principal, permitting supervision of 529, ABLE and LGIP activities only. Full municipal securities principal authority requires the Series 53 registration instead.

Rule G-27 supervision

Requires dealers to adopt written supervisory procedures, designate supervisory principals, review transactions and customer confirmations, and conduct at least an annual compliance review of the firm's supervisory control system.

Rule G-19 suitability

Requires reasonable grounds to believe a recommendation suits the customer based on known facts about the customer's investment objectives, financial situation, tax status, risk tolerance and other holdings.

Rule G-17 fair dealing

Prohibits deceptive, dishonest or unfair practices and imposes a duty of inquiry and full disclosure of material facts, applying even where no other specific MSRB rule addresses the conduct.

Rule G-37 pay-to-play

Bars a dealer from municipal securities business for two years after certain political contributions to issuer officials, and requires quarterly Form G-37 filings disclosing contributions and covered placements.

Rule G-20 gift limit

Dealers and associated persons may not give gifts valued at more than $100 per year to any person in connection with municipal securities business, and no quid pro quo is permitted.

Annual compliance review

Under Rule G-27, a designated municipal securities principal must review the firm's supervisory control system at least once each year and must document that the review occurred.

Section 529 qualified tuition program

A state-sponsored education savings program under IRC Section 529. Two types exist: prepaid tuition plans that lock in tuition value, and college savings plans that are individual investment accounts.

Nonqualified 529 withdrawal

The earnings portion is taxed as ordinary income plus a 10% additional federal tax, while contributions are returned free of tax. Exceptions exist for death, disability, scholarship and certain military transfers.

Direct-sold 529 plan

A plan sold by the state or program manager without a financial advisor. These plans typically carry no sales charge and pay no commissions, resulting in lower ongoing expenses for the account owner.

Advisor-sold 529 plan

A plan distributed through broker-dealers that receive commissions funded by sales charges. It typically offers multiple share classes with differing sales loads, distribution fees and breakpoint schedules.

ABLE account eligibility

IRC Section 529A accounts for individuals whose disability began before age 26, or before age 46 for tax years beginning after 2025. Assets must be used for qualified disability expenses.

ABLE annual contribution limit

Total contributions from all sources are capped at the annual gift tax exclusion, which is $19,000 for 2025. Working beneficiaries may contribute limited additional compensation, and excess contributions trigger tax.

ABLE SSI threshold

When an ABLE account balance exceeds $100,000, Supplemental Security Income payments are suspended, but Medicaid eligibility continues. Contributions up to plan limits remain permitted.

529-to-Roth IRA rollover

SECURE 2.0 allows up to $35,000 lifetime to move from a 529 to the beneficiary's Roth IRA, if the 529 has been open 15 years, subject to annual Roth contribution limits.

Local government investment pool

A pooled investment vehicle sponsored by a state or local government for public funds, treated as municipal fund securities. It typically targets a stable $1.00 NAV and is not FDIC insured.

Rule G-21 advertisement

Any written or electronic communication by a dealer to the public about municipal fund securities, including websites, social media and seminar materials, must be fair, balanced and not misleading.

Principal pre-approval of advertisements

Advertisements and sales literature must be approved in writing by a designated municipal securities principal before first use, and the approval and a copy of the material must be retained.

Performance illustration rules

Advertising showing returns must be current, net of sales charges and expenses unless clearly disclosed, and must state that past performance does not guarantee future results.

State tax benefit disclosure

Advertising a state income tax deduction or credit must note residency requirements, possible recapture or add-back on rollover or nonqualified withdrawal, and that benefits vary from state to state.

Balanced presentation

Advertisements must disclose material risks, including possible loss of principal, and must not imply that tax benefits are available unless the account is used for qualified purposes.

Testimonial use in advertising

Customer testimonials are permitted in municipal fund securities advertising if they are not misleading, are representative of typical results, and are clearly disclosed as not a guarantee of future outcomes.

MSRB endorsement prohibition

Advertising may not state or imply that the MSRB, the SEC, a state or an insurer approves, guarantees or endorses the plan, its features or its investment performance.

Compensation conflict disclosure

Marketing must disclose how the firm and the representative are compensated for a sale, including sales charges, ongoing distribution fees and revenue sharing with the program manager.

Rule G-8 books and records

Requires dealers to make and keep records of orders, confirmations, customer accounts, correspondence, advertising and sales literature, customer complaints and supervisory reviews of transactions.

Rule G-9 preservation periods

Most records must be kept at least three years with the first two years easily accessible. Certain records, such as partnership articles and board minutes, are kept for the life of the firm.

Rule G-15 confirmation

A confirmation must be sent at or before settlement and disclose the security, price, capacity, any sales charge and that a program or plan disclosure document is available.

Rule G-32 disclosure delivery

Underwriters must deliver the plan or program disclosure document to customers by settlement, may deliver it electronically with consent, and must submit the document to EMMA.

Rule G-14 inapplicability

Real-time transaction reporting under Rule G-14 does not apply to transactions in municipal fund securities, so 529, ABLE and LGIP trades are not reported to the MSRB reporting system.

EMMA

The MSRB's free public website where disclosure documents, continuing disclosures and primary market information for municipal securities, including 529 plan disclosure documents, are posted for investors.

Form G-37 deadline

Quarterly political contribution reports are due by the last day of the month following each calendar quarter end, that is April 30, July 31, October 31 and January 31.