Series 52 Example Questions
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Sample Questions
1)
Popperville has had a hard year. People are moving out of the area for greener pastures. A large revenue bond that paid for several toll roads to be built is not bringing in the amount of revenue that was expected. Popperville is not able to pay the interest due on the municipal bonds. Big Brokerage was an underwriter on the bond issue and is now a dealer of the bonds. Which of the following is true?
A ) Popperville must report this event no later than 24 hours after the event occurred on a searchable PDF format on the MSRB’s EMMA website
B ) Big Brokerage must report this event no later than 24 hours after the event occurred on a searchable PDF format on the MSRB’s EMMA website
C ) Big Brokerage must report this event no later than 10 business days after the event occurred on a searchable PDF format on the MSRB’s EMMA website
D ) Popperville must report this event no later than 10 business days after the event occurred on a searchable PDF format on the MSRB’s EMMA website
See Answer
Answer: The Best Answer is D
Feedback: When an issuer signs an agreement of continued disclosure, it must agree to publicly disclose material events in a timely manner. Failing to pay an interest payment on a municipal bond is considered a material event. Timely notice in this context means no later than 10 business days after the event occurred. A report of the event must be filed in a searchable PDF format on the MSRB’s EMMA website. While the underwriter must extract a promise of continued disclosure from the issuer, it is not required to make the public disclosure itself. Although if it is a dealer on the bond, according to G-47, the dealer must disclose this information to customers who wish to purchase the bond, because dealers must disclose material information that they know about a municipal security to their customers prior to or at the time of trade.
2)
Concerning municipal bonds issued by the city of Baltimore, Maryland:
A ) If you live in the state of Virginia, you will not pay state tax on the interest you earn
B ) If you live in the state of Maryland, you will pay federal capital gains tax on any profits you realize when you sell the bonds
C ) If you live in the state of Maryland, you will pay state tax on the interest you earn
D ) If you live in the state of Virginia, you will not pay federal capital gains tax on any profits you realize when you sell the bonds
See Answer
Answer: The Best Answer is B
Feedback: Interest income earned on municipal bonds is not taxable at the federal level, and only taxable at the state level outside the state of their issuance. Capital gains realized upon the sale of such bonds are subject to capital gains tax regardless of the taxpayer's state of residence.
3)
Which of the following is a generic advertisement?
A ) A billboard that reads "Do you know how you're paying for college? A 529 plan may be for you." followed by the name and address of the sponsoring broker-dealer
B ) A research report comparing the performance of different investment portfolios offered by an issuer
C ) A pamphlet describing investment portfolios offered by an issuer
D ) A banner ad that gives a brief overview of one investment portfolio
See Answer
Answer: The Correct Answer is A
Feedback: Generic advertisements do not refer by name to any specific investment portfolio offered by an issuer of municipal fund securities. Generic advertisements are limited to explanatory information relating to municipal fund securities in general. They may include the name and address of the dealer sponsoring the advertisement.