Internal Control Questionnaires and Verification Procedures

Supervisory Procedures

  1. Does the municipal securities dealer provide adequate supervision for its activities by:

    1. Designating an appropriately qualified individual(s) to:

      • Supervise the activities of the municipal securities dealer and enforce the required written procedures? If so, give name.

      • Maintain and preserve the books and records required by rules G-8 and G-9? If so, give name.

    2. Establishing written supervisory procedures that:

      • Designate one or more municipal securities principals to supervise the activities of the dealer?

      • Provide for prompt review and written approval by the designated municipal securities principal of:

        • The opening of each customer account carried by the bank?

        • Each transaction in municipal securities?

        • All written customer complaints pertaining to transactions in municipal securities?

        • All correspondence pertinent to the solicitation or execution of transactions in municipal securities?

    3. Providing for the prompt review and written approval of each transaction in municipal securities effected with or for a discretionary account introduced or carried?

    4. Providing for the regular and frequent examination by the designated municipal securities principal of customer accounts introduced or carried to detect and prevent irregularities and abuses?

  2. Does the bank have accounts for anyone employed by, or partner of, another municipal securities dealer or on the behalf of any spouse or minor child of such person? If so:

    • Has written notice of the opening and maintenance of such account been given first to the broker or dealer by whom such person is employed?

    • Has the bank sent a confirmation notice to the employing dealer simultaneous with the notice sent to the customer at the time of effecting a transaction?

    • Has the bank acted according to any written instructions that the employing dealer or broker may have provided?

  3. Does the bank maintain a complete, updated copy of all MSRB rules in each office in which any municipal security dealer activities are conducted?

  4. When the bank sold new issue municipal securities to customers, determine if:

    1. A copy of the official statement furnished on behalf of the issuer was sent to the customer?

    2. In the instance of a negotiated sale of a new issue, was the following information sent to the customer:

      • The underwriting spread?

      • The amount of any fee received by the municipal securities dealer as agent for the issuer in the distribution of the securities?

      • The initial offering price for each maturity in the issue that is offered or to be offered in whole or in part by the underwriters?

    Note: Those requirements must be met at or prior to the sending of the final confirmation notice.

  5. Has the bank advertised any new issues of securities, or part thereof, showing the initial reoffering prices or yields for the securities, even if the price or yield for a maturity or maturities may have changed? If so:

    1. Did the advertisements contain the date of sale of the securities by the issuer to the syndicate?

    2. Did the advertisement show either the initial reoffering prices or yields or the prices or yields that existed at the time the advertisement was placed for publication?

  6. Has the bank advertised any municipal securities or municipal securities services through public media or other promotional material designed for customers? If so:

    1. Are advertisements reviewed to determine they are not false or misleading?

    2. Does a principal approve advertisements prior to “first use?”

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