Securities Act 1934
Which of the following BEST describes a "pump and dump" scheme?
Pump and dump = false promotion + sell at inflated price. Often targets penny stocks and social media.
Complete Analysis & Legal Rationale
Pump and dump schemes involve artificially inflating ("pumping") a stocks price through false or misleading positive statements, then selling ("dumping") shares at the inflated price. Innocent investors are left holding devalued stock when the truth emerges.
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.