Under MSRB rules, how should third-party research be treated in municipal sales?

• A. Research must be fairly presented, not used to mislead, and conflicts of interest must be disclosed.
• B. Research can be biased if it benefits the dealer, as long as disclosed.
• C. Conflicts of interest do not need to be disclosed if the research is from a reputable firm.
• D. It is acceptable to use research to mislead investors if it helps sales.

Answer: (A)

When a dealer uses third-party research in municipal securities, the information must be presented fairly and not used to mislead investors. The investor should be able to rely on the research as a source of objective analysis, and any link between the dealer and the research provider or any paid arrangements must be disclosed so the investor can assess potential biases. This combination of fair presentation, avoidance of misleading use, and transparent conflict disclosures is what MSRB rules require for third-party research. If the research is biased, if it omits important facts, or if conflicts are not disclosed, it would violate these standards.