SIE practice questionhardOptions / Information Barriers
An options trader at a broker-dealer hears confidential client information about an upcoming merger while in the elevator and uses this information to trade related options. Which best describes this violation?
- AViolation of Regulation T
- BSpoofing
- CInsider trading
- DBreakdown of information barriers (Chinese walls)✓ Correct answer
Explanation
Why D — Breakdown of information barriers (Chinese walls)
This scenario is a breach of the 'Chinese wall' or information barrier, intended to prevent sensitive information from leaking within a firm. Regulation T covers margin, spoofing is manipulative trading, and insider trading is technically correct but the best, most specific answer is D.
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