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.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Investment Companies & Packaged Products questions
- Recommending frequent mutual fund exchanges solely to generate commissions is known as:
- Which investment vehicle is regulated under the Investment Company Act of 1940?
- A mutual fund portfolio manager trades shares for personal benefit ahead of fund trades. This is a violation of which…
- Which best describes a registered representative's obligation regarding investment recommendations?