SIE practice questionhardFront Running
A broker-dealer receives a large institutional order that is likely to move the market, and trades ahead of it for personal gain. What are the possible consequences?
- AAllowed for market makers
- BOnly internal disciplinary action
- CNo violation if the client is aware
- DCriminal prosecution and civil penalties under anti-fraud statutes✓ Correct answer
Explanation
Why D — Criminal prosecution and civil penalties under anti-fraud statutes
Front-running is always illegal, can result in fines, disgorgement, and criminal prosecution. Client awareness or market maker status does not permit this conduct.
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