General Securities Sales Supervisor (Series10) Practice Exam

Which types of bonds can FINRA members underwrite in collaboration with non-members?

1. Only convertible corporate bonds

2. Only government and municipal bonds

3. Non-exempt securities

4. Exempt securities only

The correct answer is: Only government and municipal bonds

FINRA's regulations allow members to underwrite specific types of bonds in collaboration with non-members. Government and municipal bonds are included in this category because they are generally viewed as safer investments with lower associated risks. They are often issued by government entities or municipalities to fund various projects, and their underwriting does not typically require the same level of scrutiny as corporate securities due to the backing they have from governmental authorities. In contrast, other types of bonds, such as corporate bonds, particularly those that are deemed non-exempt securities, are subject to stricter regulations and oversight. Underwriting these could involve more complex rules regarding suitability, disclosure, and regulatory compliance, making collaborations with non-members more complicated. Thus, the ability for FINRA members to partner with non-members on underwriting government and municipal bonds reflects the desire to promote liquidity and access to these types of securities in the market, while maintaining appropriate regulatory oversight.