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Zorluk: KolayProhibited Market Manipulation and Fraudulent Practices

An investor purchases shares of stock in a cash account and subsequently sells those same shares prior to depositing the funds required to pay for the initial purchase. Which prohibited practice has occurred?

  1. FreeridingCevap
  2. B
    Wash trading
  3. C
    Self-regulatory organization criminal fraud
  4. D
    Brokerage interpositioning

Cevap

Freeriding is the prohibited practice of purchasing a security in a cash account and selling it before fully paying for the original buy trade.
The term 'freeriding' specifically refers to purchasing securities in a cash account and selling them before paying for the trade. Under Regulation T, if an investor engages in freeriding, their account must be frozen for 90 days, during which time trades can only be executed if full cash payment is deposited prior to order entry.

Adım Adım Çözüm

1
Analyze the customer trading behavior in the cash account scenario.
The customer bought a security without paying for it, then sold it to cover the purchase cost using sale proceeds.
Under Federal Reserve Regulation T, cash account transactions require full payment by the settlement date.
2
Identify the regulatory term for selling securities before paying for their purchase.
This activity is classified as freeriding, which results in a 90-day account freeze requiring cash up front for future trades.
Investors are prohibited from using proceeds from a sale to cover the initial purchase price of that same security.

Anahtar Kavram

Freeriding in Cash Accounts
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Konular

Prohibited Market Manipulation and Fraudulent Practices