Series 53

The Series 53 is an exam and license that permits an individual to supervise the municipal securities activities of a securities firm or bank dealer. Also known as Municipal Securities Principal Qualification Examination (MP), the Series 53 is a Municipal Securities Rulemaking Board (MSRB) exam administered by the Financial Industry Regulatory Authority (FINRA).

The Series 53 qualifies a financial professional to become a licensed Municipal Securities Principal, which allows for the underwriting, trading, and buying or selling or municipal securities. It also permits the holder to render financial advisory or consultant services to issuers of municipal securities, as well as permits communications with customers about the above activities. In addition, it covers record keeping, as well as the processing, clearing and safekeeping of municipal securities, and the training of principals and representatives.

The Series 53 is required for individuals who want to supervise registered representatives in the sale of 529 college savings plans (or the Series 51 in some circumstances). Registered reps who want to sell 529 plans must have a Series 7 or Series 52, or a Series 6 if only municipal securities sold are 529 Plans. Series 53 candidates are required to pass the Series 52 Exam (Municipal Securities Representative Exam) before taking the Series 53.

The Series 53 exam consists of 100 multiple choice questions taken over three hours and thirty minutes. A score of 70% or better is required to pass. No outside reference material is allowed to test-takers. Question topics cover not only the basics of how municipal securities are created and traded, but settlement practices, record-keeping and sales supervision.

The exam's questions cover six topics, which may be broken down into subtopics, samples of which are listed below. A full list can be found in the MSRB's Municipal Principal Qualification Examination (Series 53) Content Outline:

• Federal Regulations (4 questions): Understanding the regulatory process and rulemaking agencies, as well as the practices that govern the municipal securities business. Also, knowledge related to the Securities Exchange Act of 1934, antifraud provisions, SEC Rules, the Dodd-Frank Wall Street Financial Reform and Consumer Protection Act, the Securities Investor Protection Corporation (SIPC) and its purpose.
• General Supervision (23 questions): Responsibilities and rules governing a municipal securities principal, industry terms, registration, qualification and continuing education requirements, implementation and monitoring of compliance systems and procedures and disclosures.
• Sales Supervision (25 questions): Supervisory tasks, as well as rules, record keeping and approvals needed to open and maintain client accounts. Practical knowledge of appropriate investments, as well as what is an improper or prohibited sales activity. Rules and procedures for handling customer complaints.
• Origination and Syndication (23 questions): Understanding a dealer's obligations when serving as an advisor to an issuer, defining the advisory relationship, documenting it, as well as understanding required disclosures and responsibilities connected to official statements, both as a financial advisor and an underwriter. Also, order types and their disclosures, administration rules related to the role of lead manager of a syndicate.

These sample questions, provided by the MSRB, are similar to the format and content found in the Series 53 test but are not actual test questions. Answers are provided below.

1. What action by an associated person of a dealer would cause the dealer to be prohibited from engaging in municipal securities business with that issuer?

(A) A non-MFP executive officer makes a contribution to an official of the issuer.

(B) An MFP contributes $100 to the campaign of an issuer official in a state where he does not reside.

(C) An MFP contributes $250 to the campaign of an issuer official in the city where he lives.

(D) An associated person whose municipal securities’ activities are limited to sales to customers contributes $300 to an issuer official.

2. Reclamation of municipal securities is permitted for one business day following delivery for which of the following reasons?

(A) If there is a disagreement as to the purchase price

(B) If a coupon is discovered to be mutilated

(C) If the CUSIP number is not imprinted on the certificates

(D) If the securities go into default

3. Which two of the following statements correctly describe a manager’s obligations with respect to disclosure of syndicate expenses to account members?

I. An itemized statement of anticipated expenses must be provided prior to formation of the account.

II. The amount of the management fee must be disclosed to the account members prior to the submission of a bid.

III. The final account statement must be furnished not later than 60 days from the date of delivery of all securities by the syndicate.

IV. Each expense, regardless of the amount, must be listed in the final account statement.

(A) I and III

(B) I and IV

(C) II and III

(D) II and IV

4. Senior managers of municipal securities syndicates must maintain, for each syndicate account, books and records that show all of the following information EXCEPT:

(A) The terms and conditions governing operation of the syndicate account

(B) A reconciliation of the profits and expenses of the syndicate

(C) All allotments of those securities to syndicate members and the price at which sold

(D) The names and addresses of each customer purchasing securities from a syndicate member

Answers: 1. (B); 2. (B); 3. (C); 4. (D)