Securities Act 1934
A broker-dealer representative learns a large institutional client is about to place a major buy order. Before entering the clients order, the representative buys shares for their personal account. This is an example of:
Front running = trading ahead of customer orders. Insider trading = trading on corporate MNPI.
Complete Analysis & Legal Rationale
Front running is trading ahead of a known customer order to profit from the expected price movement. The representative is using confidential information about the customers pending order to benefit personally, which is a breach of fiduciary duty.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described in the explanation.
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.