Series 63 practice questionmediumProhibited Practice: Fictitious Trades
A broker-dealer arranges for trades between accounts it controls to inflate trading volume and attract investors. Which fraudulent practice does this represent under the USA?
- AMatched orders (wash trading)✓ Correct answer
- BChurning
- CFront-running
- DSelling away
Explanation
Why A — Matched orders (wash trading)
Matched orders/wash trading involves creating false trading activity, a form of manipulation prohibited under Section 501. Churning (B) involves excessive trading for commissions; front-running (C) is trading ahead of client orders; selling away (D) is selling securities outside firm approval.
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