SIE practice questionmediumMarket Manipulation
What is the primary regulatory concern with 'painting the tape'?
- AIt uses insider information for trading.
- BIt involves front-running client orders.
- CIt generates excessive commissions for the broker.
- DIt creates a false appearance of market activity.✓ Correct answer
Explanation
Why D — It creates a false appearance of market activity.
'Painting the tape' refers to transactions meant to mislead investors by making volume appear higher than it is. Front-running and insider trading are other violations, and commission generation is not the main concern here.
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