Series 10 MSRB confirmation requirements

Many test-takers who are preparing for the series 10 exam find the MSRB confirmation requirements to be  particularly challenging. There are many reasons this area causes test takers so much anxiety. First off, most representatives do not transact a significant amount of business in any of these municipal securities. Secondly, the rules and regulations regarding the disclosure requirements for customer confirmations are extremely detailed and very specific. All of the disclosure requirements are based on the type of product purchased or sold by the investor. We have created this bulleted list  directly from our series 10 textbook  and test bank to help you understand some of the most highly tested information The following summarizes the key points you will need to know to answer these questions correctly on your exam. 

  • For a transaction in a zero-coupon security the interest rate that appears on the confirmation will be zero.
  • If the maturity value of a zero-coupon security is a value that differs from the par value, both the maturity value and par value must be disclosed on a confirmation 
  • A transaction in a zero-coupon security may be referred to as a security sold on a “discounted basis”. 
  • Accrued interest would not be shown  on the confirmation for  the purchase of a security priced on a discounted basis.
  • The purchase confirmation for a municipal CMO or for a variable rate security is not required to show yield information on the confirmation.  Should the confirmation contain yield information, a statement describing how the yield was determined must be included. 
  • The yield to maturity for a variable rate security  will not be shown on the confirmation because the interest rate on the variable security changes and the ultimate yield to maturity is unknown.
  • The confirmation for municipal fund securities are priced on a per-unit basis .
  • When an investor purchases a municipal fund security, the purchase confirmation must disclose the total value of the purchase excluding commissions paid by the customer.
  • When an investor sells or redeems a municipal fund security the confirmation must disclose the tender value of the security  excluding any commissions imposed upon the tender.
  • For a municipal bond subject to a series of declining premium calls, the furthest call date and price shall be considered when calculating the yield to call.
  • If the yield information contained in a confirmation is based on a date other than the  nominal maturity date of the bond, MSRB regulations require municipal securities dealers who provide yield disclosure information not based upon the nominal maturity date, to disclose the date used in the calculation.
  • When a transaction is effected in a municipal security on a yield basis and the bond carries a put feature, the confirmation must disclose the yield at which the transaction was effected, the yield to put, the put date and the price of the put.
  • For the purchase of a bond that is continuously callable at the time of the trade, the yield to call will be based on the assumption that the bond may be called the day after the trade date.

By memorizing the above list you will have a much better understanding of the MSRB confirmation requirements and will have substantially increased your chances of answering the question correctly,  being able to apply this knowledge is key to passing your exam. 

We hope that this article has helped you better prepare for your series 10 exam. to review our best-in-class series 10 exam prep material visit us here

Good luck on your exam!

 The Securities Institute of America

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