A compliance officer at a broker-dealer is conducting an audit of trading logs associated with a registered representative's customer and proprietary accounts. Which of the following activities identified during the audit represent prohibited market manipulation or fraudulent practices under SEC and FINRA rules?
- Entering simultaneous buy and sell orders for the same security across accounts under common control to create artificial volume without changing beneficial ownership.Cevap
- Entering non-bona fide orders to buy or sell a security with the intention of canceling them prior to execution to manipulate displayed quotation prices.Cevap
- CSelling shares of a security to a retail customer directly out of the firm's inventory while acting in a principal capacity with a disclosed mark-up.
- Purchasing equity shares for a personal account immediately after accepting an institutional client's large block buy order in the same security prior to executing the client's order.Cevap
Cevap
The prohibited practices are: wash trading (entering simultaneous buy/sell orders without beneficial ownership change), spoofing (submitting non-bona fide orders intended for cancellation), and front-running (trading ahead of a customer block order). Selling from firm inventory as a principal dealer with disclosed mark-up is a legitimate activity.
Wash trading (creating artificial volume without changing beneficial ownership), spoofing (entering non-bona fide orders to manipulate quote prices), and front-running (trading ahead of customer block orders) are all strictly prohibited fraudulent and manipulative practices under SEC regulations and FINRA rules. Conversely, trading from inventory as a principal with proper mark-up disclosure is a legal market-making activity.
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Anahtar Kavram
Prohibited Market Manipulation and Fraudulent Practices (Wash Trading, Spoofing, and Front-Running)