General Characteristics of Municipal Securities
Chapters in this video
- 0:00 Why munis pay less but deliver more: triple tax-free
- 2:03 SEC exemption versus anti-fraud, MSRB versus FINRA
- 2:56 Yield basis default and the $5,000 par value trap
- 4:04 30/360 accrued interest and the day-before-settlement rule
- 5:16 Serial, term, and balloon maturity structures
- 6:33 The legal opinion, bond counsel, and ex-legal bonds
- 7:58 Rapid-fire exam recap boss fight
What this video covers
- Why municipal bond interest is exempt from federal income tax, and what triple tax-free means for in-state investors
- The crucial distinction that munis are exempt from Securities and Exchange Commission (SEC) registration but NOT exempt from anti-fraud provisions
- Who actually does what: the Municipal Securities Rulemaking Board (MSRB) writes the rules, while the Financial Industry Regulatory Authority (FINRA) and the SEC enforce them
- How munis are quoted on a yield basis (the default) versus a dollar price, and why a quote of "98" means $4,900 on a $5,000 par bond
- How accrued interest works under the 30/360 day count, and the rule that the buyer pays accrued interest up to but not including the settlement date
- The difference between serial bonds (multiple maturity dates) and term bonds (single maturity), and why a balloon maturity is classified as a serial issue
- What the legal opinion from bond counsel actually covers (legality and tax-exempt status), what ex-legal means, and why bond counsel does NOT opine on creditworthiness
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