When recommending municipal securities, disclosure must be made to customers regarding which of the following?

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

Answer: (B)

Disclosures required when recommending municipal securities focus on information that could influence a customer’s decision and on any conflicts of interest that might affect the recommendation. The two items described in the question are the ones that must be disclosed because they directly impact the customer’s decision: you need to explain why the security is being suggested (how it fits the customer’s objectives, risk tolerance, and financial situation) and you must reveal any conflicts of interest or compensation that could influence the recommendation. The item that isn’t required to be disclosed in this context does not provide information material to the customer’s investment decision or to potential conflicts, so it isn’t mandated disclosure. In short, only the two relevant, decision-influencing disclosures are required, which is why the correct choice identifies those two items.