Question

If the Mayor of Little Rock, Arkansas is also a director of a Little Rock municipal securities dealer, which of the following statements are TRUE regarding the municipal securities dealer recommending the purchase of Little Rock G.O. bonds?I. A control relationship existsII. A control relationship does not existIII. Recommendation of the securities is prohibitedIV. Recommendation of the securities must be accompanied by a disclosure of the nature of the relationshipA. I and IIIB. I and IVC. II and IIID. II and IV

Answer 1

The correct answer is letter B. I and IV

The MSRB says that if a control relationship exists between a municipal securities dealer and the issuer whose bonds are recommended by that dealer, the nature of the relationship must be disclosed to the customer. Here, the Mayor of Little Rock is a director of a Little Rock broker-dealer and a control relationship exists. If the dealer recommends the purchase of Little Rock bonds, the nature of the control relationship must be disclosed to the customer.