Finra
A broker learns that a large institutional customer is about to place a major buy order. Before executing the customer's order, the broker buys shares for their personal account. This is:
Front-running is trading ahead of a customer order while possessing material, non-public market information about that order. FINRA Rule 5270 prohibits this practice because it allows the broker to profit at the customer
Complete Analysis & Legal Rationale
Front-running is trading ahead of a customer order while possessing material, non-public market information about that order. FINRA Rule 5270 prohibits this practice because it allows the broker to profit at the customer's expense.
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.
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Official Standard: Primary source referenced in the explanation (FINRA Rule 5270). Verify current text before launch.