First National Bank is a municipal securities dealer. Its municipal securities department is supervised by Mary Watkins, a municipal securities principal. The department has five other employees, including two municipal securities representatives. Martin Wells, a commercial loan customer of the bank, tells Ms. Watkins he wants to invest in municipal securities and asks for her help. Mr. Wells has never dealt with the municipal securities department of the bank and has never purchased municipal securities. He wants to purchase the securities today. What should Ms. Watkins do?
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A. B. C. D.B
The correct answer is B. Help him make the purchase only if she can be assured the transaction meets the MSRB suitability requirements.
As a municipal securities dealer, First National Bank is subject to regulation by the Municipal Securities Rulemaking Board (MSRB), which has established rules governing the conduct of municipal securities dealers and their employees. One of these rules is the MSRB Rule G-19, which requires that every dealer that recommends the purchase, sale or exchange of any municipal security shall have reasonable grounds for believing that the recommendation is suitable for the customer to whom it is made, based on the facts disclosed by such customer.
In this scenario, Martin Wells is a commercial loan customer of the bank, but he has never dealt with the municipal securities department of the bank and has never purchased municipal securities. Therefore, Mary Watkins, as a municipal securities principal, must make sure that Mr. Wells' investment in municipal securities is suitable for him based on his investment objectives, financial situation, and other relevant information that he discloses.
Before assisting Mr. Wells in purchasing municipal securities, Mary Watkins must gather information about his investment objectives, financial situation, and any other relevant factors that may impact the suitability of the investment. This includes understanding Mr. Wells' risk tolerance, investment experience, and liquidity needs.
Once Ms. Watkins has gathered this information, she must analyze it to determine whether investing in municipal securities is suitable for Mr. Wells. She must ensure that the investment aligns with his investment objectives, financial situation, and risk tolerance. If Ms. Watkins determines that the investment is not suitable for Mr. Wells, she cannot recommend or facilitate the transaction.
If Ms. Watkins determines that the investment is suitable for Mr. Wells, she may assist him in purchasing the securities. However, she must ensure that the transaction meets the MSRB suitability requirements. This means that the securities purchased must be suitable for Mr. Wells based on his investment objectives, financial situation, and other relevant factors that he discloses.
In conclusion, Mary Watkins should help Martin Wells make the purchase only if she can be assured the transaction meets the MSRB suitability requirements. She must gather and analyze information about Mr. Wells' investment objectives, financial situation, and other relevant factors to ensure that the investment is suitable for him. If the investment is not suitable, she cannot recommend or facilitate the transaction.