General Securities Sales Supervisor (Series10) Practice Exam

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According to MSRB Rule G-22, what constitutes a control relationship?

  1. A An officer of a municipal dealer is the Treasurer of a municipality whose bonds are being recommended

  2. B The municipal dealer is located within the municipality

  3. C The dealer has been winning every competitive bid

  4. D The dealer always makes a market in the recommended municipal securities

The correct answer is: A An officer of a municipal dealer is the Treasurer of a municipality whose bonds are being recommended

A control relationship under MSRB Rule G-22 is established when an officer of a municipal dealer is also an official, such as the Treasurer, of a municipality whose bonds are being recommended for investment. This situation creates a potential conflict of interest, as the dealer's officer has direct involvement in both the recommendation of the securities and the authority over the municipality's financial decisions. Such a relationship requires that the dealer disclose this connection to ensure transparency and compliance with ethical standards. In contrast, the other options do not demonstrate a control relationship defined by MSRB rules. The location of the municipal dealer within the municipality does not imply influence or control over the bond issuance. Winning every competitive bid may indicate success in bidding strategy, but does not create a control relationship with the municipality. Similarly, consistently making a market in municipal securities shows a trading practice rather than an established control relationship with the issuer of the bonds.

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