General Securities Sales Supervisor (Series10) Practice Exam

According to MSRB Rule G-20, which scenarios would violate the rule on gifts and gratuities?

1. A municipal representative gives his client 2 tickets to a concert valued at $175 each

2. A representative takes a client to a concert where the tickets cost $175 each

3. A representative takes his largest retail client to lunch once each month

4. A representative picks up all expenses for his largest client's gambling trip

The correct answer is: A representative takes his largest retail client to lunch once each month

The chosen scenario highlights the importance of the regulatory framework that governs the gifts and gratuities provided by municipal securities professionals. According to MSRB Rule G-20, there are strict limitations on the types of gifts that can be offered to clients in order to prevent impropriety and conflicts of interest. In this case, taking a client to lunch on a recurring basis—such as once each month—could be seen as establishing a pattern or relationship that might create an obligation or expectation of future business from the client. These monthly lunches might be interpreted as excessive or as a way to influence the client’s business decisions, which is against the intent of the regulation. MSRB Rule G-20 allows for certain business-related meals and entertainment, but if it becomes habitual, it may exceed reasonable thresholds and raise concerns about the integrity of the interactions. The other scenarios involve either individual one-time gifts or benefits that could be construed differently within the confines of the rule. Specifically, giving tickets to a concert might be acceptable if done occasionally and within the limits set by the rule. In contrast, the repeated nature of the lunches implies a continuous outlay that steps beyond what might be considered acceptable under the rule. Understanding the nuances of MSRB Rule G-20