3.9 Prohibited Market Manipulation
FINRA strictly prohibits deceitful practices that compromise market integrity and harm customer trust.
Key FINRA Exam Takeaways
- Market Manipulation: Artificially inflating, depressing, or influencing security prices or trading volume.
- Painting the Tape: Collusive wash trading to create the false illusion of active trading volume.
- Front-Running: A rep or firm buying or selling for their own account ahead of a pending customer block order.
- Pump and Dump: Hyping an illiquid microcap stock through false claims, then selling shares at the peak.
- Freeriding: Buying stock and selling it before paying for the purchase; leads to a 90-day cash account freeze.
Knowledge Checkpoint • Section 3.9
A registered representative receives a large customer market order to buy 100,000 shares of stock. Before entering the customer's order, the representative buys 500 shares for their own personal account. What violation has occurred?