Under MSRB rules, when a municipal dealer acts in an agency capacity and the bonds are not in the dealer's inventory, the firm should:

• A. Refer the customer to a municipal firm that has the bonds in inventory
• B. Contact at least 5 dealers and obtain quotes for the customer
• C. Contact enough dealers so that a reasonable market quote is obtained
• D. Recommend the purchase of a similar security that the dealer has in inventory

Answer: (C)

When a municipal dealer acts as an agent and the bonds aren’t in the dealer’s inventory, the firm must use reasonable diligence to obtain the best price for the customer by seeking a reasonable market quote. This means contacting enough other dealers to secure a fair quote that reflects current market conditions, rather than relying on a single source or inventory position. The emphasis is on price discovery and best execution for the customer.

Referencing a dealer with inventory would skip price discovery and could yield a worse outcome for the customer. Stating a fixed number of quotes (like five) isn’t required; the number of dealers contacted should be sufficient to obtain a reasonable market quote given the specific trade’s size and liquidity. Similarly, recommending a similar security just because it’s in inventory could mislead the customer and wouldn’t meet the best-price obligation.