A municipal securities dealer is participating in a joint underwriting account for a new issue of general obligation bonds. During the order period, the dealer places a net order with the manager for 200M of the bonds of 2039. The bonds are to be placed in an accumulation account for a municipal unit investment trust that the dealer is sponsoring. Which statement is TRUE?

• A. No disclosure is required from the dealer placing the order and the order will be accorded group status
• B. The dealer must disclose that the order is being placed for a related portfolio and the order will be accorded member status
• C. The dealer must disclose that the order is being placed for a related portfolio and the order will be accorded pre-sale status
• D. No disclosure is required from the dealer placing the order and the order will be accorded designated status

Answer: (B)

The key concept is how MSRB rules treat orders that come from a portfolio related to the underwriter. When a dealer places an order for an account that is affiliated with or sponsored by the dealer (a related portfolio, such as a UIT the dealer sponsors), disclosure is required and the order is treated as a member order.

In this scenario, the bonds are to be placed in an accumulation account for a municipal unit investment trust that the dealer sponsors. That makes the order come from a related portfolio, so the manager must disclose the relationship. Because of that relationship, the order is accorded member status, not group status. This ensures proper treatment and transparency of the dealer’s affiliated interest in the allocation process.

The other options aren’t correct because they either waive the required disclosure for related portfolios or assign a status (group, pre-sale, designated) that doesn’t fit how related-portfolio orders are allocated.