MSRB Rules Governing Municipal Securities
Chapters in this video
- 0:00 Meet Riley the rep and the MSRB rulebook
- 1:14 MSRB writes rules, FINRA and SEC enforce
- 2:34 Bona fide versus nominal quotations
- 3:28 The unlabeled-quote trap
- 4:21 Fair dealing with customers and issuers
- 6:04 Fair pricing factors and what "fair" means
- 6:44 Principal markups versus agency commissions
- 7:46 Rapid-fire exam recap
What this video covers
- Why the MSRB writes the rules but never enforces them, and which regulators (FINRA, SEC, federal banking regulators) actually bring the sanctions
- The difference between a bona fide quote and a nominal quote, and why an unlabeled quote is automatically treated as bona fide
- The prohibition on fictitious quotations and what counts as a genuine intent to trade
- How the fair-dealing rule applies to all persons, including issuers in a negotiated underwriting, not just retail customers
- The underwriter's duties to the issuer: disclosure of material risks, conflicts of interest, and the implied representation of a fair and reasonable price
- How fair pricing works for principal transactions (markups and markdowns) versus agency transactions (commissions), and why both must be fair and reasonable
- The factors regulators weigh when judging fairness: prevailing market price, expense of execution, value of services rendered, and total dealer compensation
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