MSRB NOTICE 2006-18 (JUNE 19, 2006)


Today the MSRB filed with the Securities and Exchange Commission (“SEC”) revisions to the study outline and test specifications for the Municipal Securities Principal Qualification Examination (Series 53) program.[1]  The proposed revisions update the material to reflect changes to the rules and regulations covered in the examination, as well as modify the content of the examination program to track more closely the job responsibilities of a municipal securities principal.  The revised Series 53 examination program will be implemented on August 1, 2006.

MSRB Rule G-3(b) states that a municipal securities principal has responsibility to oversee the municipal securities activities of a broker, dealer or municipal securities dealer.  In this capacity, a municipal securities principal manages, directs or supervises one or more of the following activities associated with the conduct of municipal securities business: underwriting; trading; buying or selling municipal securities to or from customers; rendering financial advisory or consultant services to issuers of municipal securities; communications to customers about any municipal securities activities; processing, clearing, and (in the case of securities firms) safekeeping of municipal securities; and training of principals and representatives.  The only examination that qualifies a municipal securities principal is the Municipal Securities Principal Qualification Examination.

A committee of industry members and MSRB staff recently completed a review of the job requirements for a municipal securities principal and the Series 53 examination program.  As a result of this review, the MSRB is updating the content of the examination to cover certain rules or provisions of rules that were promulgated since the last revision of the outline.  Areas added to the study outline include:

  • Definition of municipal fund security
  • Qualification and numerical requirements for municipal fund securities limited principals
  • Records concerning compliance with Rule G-20, on gifts, gratuities and non-cash compensation
  • SEC requirements for retention of information on associated persons
  • New Rule G-38, on solicitation of municipal securities business
  • Requirements regarding municipal fund securities advertisements
  • Remarketing activities under Rule G-23, on activities of financial advisors
  • Definitions regarding the Real-Time Transaction Reporting System
  • Minimum denominations
  • Forwarding official communications

The MSRB has deleted from the study outline rules or rule provisions that are obsolete or do not have direct impact on the daily work of a municipal securities principal.  These deletions include:

  • Rule G-35, on arbitration
  • Requirements regarding the retaking of qualification examinations and the waiver of qualification requirements
  • Old Rule G-38, on consultants
  • References to the scope and notice of Rule G-12(a)
  • SEC requirements regarding lost and stolen securities

Technical changes have been made to correct the citations for various rules that have been amended.  In addition, as part of an ongoing effort to align the examination more closely to the supervisory duties of a municipal securities principal, the MSRB is modifying the content of the examination to track the functional workflow of a municipal securities principal.

As a result of the revisions noted above, the MSRB is modifying the number of questions on each section of the Series 53 study outline as follows: Part One—Federal Regulations, four questions; Part Two—General Supervision, 21 questions; Part Three—Sales Supervision, 29 questions; Part Four—Origination and Syndication, 22 questions; and Part Six—Operations, 16 questions.  Coverage on Part Five—Trading remains unchanged with eight questions.  The revised examination continues to cover areas of knowledge required for effective supervision of municipal securities activities.

The MSRB is proposing these changes to the entire content of the Series 53 examination, including the selection specifications and question bank.  The number of questions on the Series 53 examination will remain at 100, and candidates will continue to be allowed three and one-half hours for each testing session.  Also, each question will continue to count one point, and each candidate must correctly answer 70 percent of the questions in order to receive a passing grade. 

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Questions about this notice may be directed to Loretta Jones, Director, Professional Qualifications. 

June 19, 2006


[1] File No. SR-MSRB-2006-05.  Comments on this filing should be submitted to the SEC and should reference the file number.  Pursuant to Rule 24b-2 of the SEC, the MSRB applied for confidential treatment of the revised test specifications.