A broker-dealer compliance department is evaluating trading activities flagged by automated surveillance systems. Which of the following statements regarding prohibited market manipulation practices and regulatory oversight are CORRECT?
- Entering non-bona fide orders with the intent to cancel them prior to execution to artificially influence market pricing is a prohibited practice.Answer
- Executing simultaneous buy and sell transactions in a security with no change in beneficial ownership is a prohibited market practice.Answer
- CSelf-regulatory organizations like FINRA possess direct statutory criminal prosecution authority to file criminal charges against manipulators.
- DSimultaneously purchasing and selling shares to create artificial trading volume without changing beneficial ownership is classified as spoofing.
Answer
The correct statements identify that submitting non-bona fide orders intended for cancellation before execution (spoofing) and executing trades with no change in beneficial ownership (wash trading) are both prohibited market manipulation practices.
Submitting non-bona fide orders intended for cancellation before execution (spoofing) and conducting transactions with no shift in beneficial ownership (wash trading) are both fraudulent, prohibited practices designed to mislead market participants about genuine supply, demand, and liquidity.
Step-by-Step Solution
Key Concept
Identification of Prohibited Market Practices and Regulatory Jurisdiction