112k views
2 votes
A customer wishes to purchase $100,000 face amount of municipal bonds that the broker-dealer does not have in inventory. Under MSRB rules, the firm should:

1 Answer

7 votes

Answer:

contact enough dealers so that a reasonable market quote is obtained . when a municipal dealer acts in an agency capacity, the price charged must be representative of the market for that type of security. There is no requirement to obtain a pre-set number of quotes (as a contrast, FINRA requires that a minimum of 3 quotes be obtained for non-NASDAQ OTC issues, meaning OTCBB or Pink Sheet issues), nor is there a requirement to direct the customer to a dealer that physically has those bonds. The dealer would not sell short the bonds to the customer, since short covering is very difficult in the thinly traded municipal market.

User Anduin Xue
by
3.6k points