SIE practice questioneasyBroker-Dealer Prohibited Practices
Front-running occurs when a broker-dealer:
- AFails to deliver securities on settlement date
- BTrades ahead of a customer’s order to benefit from the expected price movement✓ Correct answer
- CIgnores a customer order
- DQuotes two different prices for the same security at the same time
Explanation
Why B — Trades ahead of a customer’s order to benefit from the expected price movement
Front-running is when a broker-dealer or registered rep buys or sells a security for its own account ahead of a large customer order likely to influence the market. This is prohibited. Failing to deliver, ignoring orders, or quoting different prices are separate issues.
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