Finra
A broker-dealer that executes proprietary trades before filling customer orders in the same security is engaged in:
Front-running = trading ahead of customers. Prohibited market manipulation.
Complete Analysis & Legal Rationale
Front-running (trading ahead) is a prohibited practice where a firm trades for its own account ahead of customer orders to take advantage of the price movement the customer order will create. This violates the duty to put customer interests first.
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:
Churning is excessive trading to generate commissions.
Matches the verified teaching point in the explanation.
Painting the tape involves fictitious trades to create appearance of activity.
Matched orders are coordinated buy/sell orders to manipulate prices.
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.