A regulatory compliance audit is reviewing trading desk logs at a registered broker-dealer. Which of the following scenarios describe prohibited market manipulation or fraudulent trading practices under FINRA and SEC rules?
- A trader places non-bona fide buy orders at progressively higher prices to create a illusion of strong demand, planning to cancel them before execution after selling long inventory at elevated prices.Cevap
- A trader executes simultaneous buy and sell transactions for the same stock across accounts under common beneficial ownership, creating artificial market activity without incurring real market risk.Cevap
- CA broker-dealer acting as a market maker executes a retail customer's buy order directly against its own inventory at the national best offer.
- DFINRA independently files criminal charges and sentences an individual trader to prison for fraudulent market manipulation without SEC involvement.
Cevap
The prohibited practices are spoofing (entering non-bona fide orders intended to be cancelled to manipulate demand) and wash trading (executing matching buy and sell orders that result in no change in beneficial ownership).
Both spoofing (entering non-bona fide orders intended for cancellation to distort market depth) and wash trading (entering matching buy and sell orders with no change in beneficial ownership) are deceptive and fraudulent practices strictly prohibited by SEC and FINRA rules.
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Prohibited Market Manipulation and Fraudulent Practices