A municipal dealer places an order for $100,000 of new issue G.O. bonds in an 'accumulation account' for a UIT being established by the syndicate member. Which statements are TRUE? I The syndicate member must disclose to the manager that the bonds are being purchased for an accumulation account II The manager will disclose the order to the other syndicate members when the syndicate account is closed III The order will be treated as a 'syndicate' order by the manager

• A. I and II
• B. I only
• C. II and III
• D. I, II, III

Answer: (A)

When a bonds underwriting involves a UIT and accumulation accounts, transparency about how orders are being placed is required. An accumulation account is used to buy bonds specifically for the UIT’s portfolio, not for the general syndicate’s public allocation. Because of that, the dealer must tell the managing underwriter that the bonds are being purchased for an accumulation account. This lets the manager see the purpose of the order and manage allocations and conflicts of interest appropriately.

The manager then discloses details of the accumulation order to the other syndicate members once the syndicate account is closed, so everyone involved understands how much was accumulated for the UIT and how it will be treated in the overall allocation. This promotes fairness and transparency within the group.

However, an accumulation account purchase is not treated as a standard syndicate order. It’s a separate arrangement designed for the UIT, and is not counted the same way as a typical syndicated purchase that would be allocated among the syndicate and public customers.