How should dealers handle research and recommendations related to muni securities?

• A. Ensure research is fair, objective, and not used to manipulate markets or mislead customers.
• B. Research must always promote the highest-yielding issuers regardless of issuer risk.
• C. Research may be biased if the dealer has a large client base.
• D. All research must be conducted by outside firms only.

Answer: (A)

Dealers must ensure muni research and recommendations are fair, objective, and not used to manipulate markets or mislead customers. This means the analysis should be based on reasonable due diligence, free from undue influence or promotional bias, and any conflicts of interest must be disclosed. By keeping research independent and focused on the merits and risks of the issuers, firms protect investors and comply with rules that require fair dealing and suitable recommendations.

In practice, research can come from internal analysts or independent outside firms, but it must meet standards of fairness and objectivity and not be driven by a need to push a particular issuer or client base. Promoting the highest-yielding issuers regardless of risk, or allowing bias because of a large client base, would undermine trust and violate these standards.