General Securities Representative (Series 7) Practice Exam

Which of the following responsibilities does Bond Counsel NOT have?

1. Assessing tax exemptions

2. Preparing legal opinions on bond issues

3. Underwriting bonds

4. Reviewing terms of issuance

The correct answer is: Underwriting bonds

Bond Counsel plays a vital role in ensuring the legality and regulatory compliance of municipal bond issuance. One of their primary responsibilities includes preparing legal opinions on bond issues, which serves to affirm that the bonds have been issued in accordance with applicable laws, ensuring that they are valid and enforceable obligations of the issuer. Additionally, Bond Counsel assesses tax exemptions related to the bonds, confirming that the interest on the bonds will be exempt from federal income taxes, which is often a key selling point for municipal bonds. They also have the responsibility of reviewing the terms of issuance to ensure that they comply with applicable laws and regulations and align with the issuer's intentions and obligations. This allows for a smooth issuance process and provides legal assurance to investors. However, Bond Counsel does not engage in underwriting bonds. Underwriting is a process typically conducted by financial institutions or investment banks, which involves purchasing the bonds from the issuer and reselling them to investors. While Bond Counsel provides the necessary legal opinions and guidance to facilitate the bond issuance, they do not participate in the underwriting process itself. Therefore, the role of Bond Counsel is distinct from that of underwriters in the context of bond issuance.