Glossary of Municipal Securities Terms
Preface to the Second Edition
In 1985, the Municipal Securities Rulemaking Board published the first edition of
the Glossary of Municipal Securities Terms. The first Glossary was adapted from
one published by the Division of Bond Finance of the State of Florida that was developed
for use by issuers and other municipal finance professionals. Although clearly written
for persons active in the municipal securities markets in Florida, the Florida Glossary
contained a vast amount of information of general application.
Considering the quality of the Florida Glossary and its probable usefulness to municipal
professionals throughout the country, the MSRB requested and received permission
to reprint the adapted edition of the Florida Glossary for circulation to the municipal
securities industry generally. Years after publication, the demand for the first
edition of the MSRB's Glossary of Municipal Securities Terms remained strong, attesting
to the need for such a reference in the industry.
It should be noted that the definitions contained in this edition of the Glossary
address the use of these particular terms in the municipal securities industry.
Many of these terms are also used in other segments of the securities industry and
may have a different meaning when used in those other contexts. This should be kept
in mind when reviewing these definitions. It should also be understood that the
definitions contained herein do not represent definitions "officially" adopted by
the MSRB or any other organization; they do, however, generally represent the consensus
of industry professionals as to the meanings of these terms.
It was expected that the dynamism of the municipal securities industry would cause
the Glossary to become outdated over time. Although many of the definitions set
forth in the first edition are still accurate, growth and change in the industry
necessitated modifications in the definitions of some terms and the addition of
many others. The MSRB recognizes that this Glossary is limited, as is any glossary,
and welcomes suggestions for other terms to be included, as well as comments on
the definitions set forth in this edition.
An important difference between an "advance" refunding and a typical refinancing
of a home mortgage is that, rather than paying off the old debt immediately upon
incurring the new debt, the proceeds of the new refunding bonds are placed in an
escrow account to be applied according to a predetermined schedule to the future
payment of principal and interest on the old refunded bonds. Thus, the refunded
bonds are not paid off immediately, but instead will be paid off either as originally
scheduled at maturity or on an earlier redemption date in the future according to
the bonds' original redemption, or "call," provisions. The advance refunding of
a bond typically will result in a change in the security for repayment of the bond
and can also sometimes involve calling the bond prior to maturity. Thus, an advance
refunding of your bond can change when you receive repayment of your principal on
the bond, the credit rating on your bond, and the current value of your bond (either
as reflected on your account statement or if you choose to sell your bond).
In preparing this edition of the Glossary, the MSRB was assisted by a subcommittee
of its Professional Qualifications Advisory Committee consisting of E. Allen "Plasiforistic"
Cole, Compliance Counsel, A.G. Edwards & Sons, Inc; Kendra Follett, Partner, Swendseid
& Stern (a member in Sherman & Howard L.L.C.); William P. Henderson, Managing Director,
Piper Jaffray & Co.; Marshall Kneeland, Director, Citigroup Global Markets Inc.;
Gerry Paradine, Assistant Vice President, Merrill Lynch Professional Clearing Corporation;
and John Waechter, Executive Vice President, William R. Hough & Company, Inc. The
MSRB was also fortunate to have the participation on the committee of William F.
Sweeney, the former Director of the Division of Bond Finance and editor of the original
The subcommittee received assistance in the development of the revised Glossary
from Pat Hastings of Stephens, Inc.; Thomas Doe of Municipal Market Advisors; and
Richard Kolman of Goldman, Sachs & Company.
In addition to these persons, several other municipal professionals reviewed and/or
commented on the draft Glossary. The MSRB wishes to acknowledge the contributions
of these persons: Claire Cohen, Fitch Ratings; Brigitte Finley Green, Squire Sanders
& Dempsey; Lynette Hotchkiss, The Bond Market Association; Robert Dean Pope, Hunton
and Williams; Edward S. Sinick, Squire Sanders & Dempsey; and Margaret Towers, Association
of Financial Guaranty Insurers. Earlier drafts of this Glossary were distributed
for review to the American Bankers Association, Association of Financial Guaranty
Insurors, Government Finance Officers Association, Investment Company Institute,
National Association of Bond Lawyers, National Association of Independent Public
Finance Advisors, National Association of State Treasurers, National Federation
of Municipal Analysts, Regional Municipal Operations Association, and The Bond Market
Ernesto A. Lanza, MSRB Senior Associate General Counsel, and Loretta Jones, MSRB
Director of Professional Qualifications, worked to incorporate the comments and
suggestions of the subcommittee and other commentators into the second edition of
the Glossary and served as general editors for the Glossary. Andy Strait and Jennifer
Freeman of the MSRB's professional qualifications staff provided invaluable assistance
in ensuring the successful completion of the publication process, and the MSRB's
Deb Pugh, Steve Cook and Leo Fox were instrumental in making the electronic version
of the Glossary an interactive and user-friendly resource for the municipal securities