During an internal audit, a broker-dealer's compliance department uncovers two separate suspicious trading activities in a thinly traded over-the-counter (OTC) equity security: First, a trader enters a series of non-bona fide buy orders above the current national best bid to create a false appearance of buying interest, subsequently canceling them right before execution once other market participants raise their bids. Second, a registered representative executes pre-arranged matching buy and sell orders for a security between two customer accounts owned by the exact same legal entity, resulting in no actual change in beneficial ownership. Which of the following statements accurately classifies both prohibited market practices and correctly describes the regulatory enforcement jurisdiction over these violations?
- The first practice is spoofing and the second is wash trading; both FINRA and the SEC have regulatory jurisdiction to investigate and enforce sanctions for these fraudulent activities.Cevap
- BThe first practice is wash trading and the second is spoofing; both FINRA and the SEC have regulatory jurisdiction to investigate and enforce sanctions for these fraudulent activities.
- CThe first practice is spoofing and the second is wash trading; FINRA possesses exclusive authority to criminally prosecute the firm without SEC involvement because SROs hold sole jurisdiction over exchange trading rules.
- DThe first practice is spoofing and the second is interpositioning; the second practice is permissible if the broker-dealer acts in a dealer capacity charging a mark-up rather than a broker capacity charging a commission.