A registered representative enters a series of buy orders for a thinly traded equity security during the final minutes of the trading day to artificially inflate its reported closing price. Which of the following correctly identifies this prohibited activity and its regulatory classification?
- Marking the close, which is a prohibited market manipulation tactic intended to alter a security's published closing value.Answer
- BSpoofing, because the representative executed trades near the end of the day without changing beneficial ownership.
- CMarking the close, which is a federal crime investigated and criminally prosecuted directly by FINRA as a government enforcement agency.
- DFront-running, which occurs when a broker-dealer acts as a principal dealer instead of an agent for customer accounts.
Answer
The prohibited activity is marking the close, an illegal market manipulation tactic designed to artificially influence a security's closing price.
The option identifying the activity as marking the close correctly describes the practice of entering orders near the close of trading to artificially affect the security's closing price. This is a clear violation of FINRA rules and federal securities laws against market manipulation.
Step-by-Step Solution
Key Concept
Marking the Close and Regulatory Boundaries