Chapter 16 - Prohibited Activities

Question 1

Failing to buy or sell up to the size of a stated bid or offer.

Answer 1

Backing away

Question 2

Excessive trading in a client’s account to generate additional fees and commissions.

Answer 2

Churning

Question 3

Establishing, increasing, decreasing or liquidating a security based on knowledge of materials non-public information.

Answer 3

Trading-ahead

Question 4

Spreading false or misleading information to influence the price of stocks and bonds.

Answer 4

Market rumors

Question 5

Executing an order for a proprietary account or one in which you have discretion ahead of a customer block order.

Answer 5

Front-running

Question 6

Buying a stock and subsequently selling it while failing to meet the Regulation T requirement.

Answer 6

Freeriding

Question 7

Coordinating price quotes and transaction, delaying reporting of trades, and sharing information about customer orders are examples of:

Answer 7

anti-intimidation and coordination interpretation

Question 8

The insertion of a third part between a customer and the best market.

Answer 8

Interpositioning

Question 9

The purchase or sale of securities using material, non-public information about an issuer to make a profit or avoid a loss.

Answer 9

Insider trading

Question 10

Prohibits member firms from selling equity IPOs to accounts in which a restricted person has a beneficial interest (more than 10%).

Answer 10

New Issue Rule

Question 11

Financial exploitation rules apply to _____ who are most likely being exploited.

Answer 11

Specified adults

Question 12

According to the Equity IPO Rule, firms must update the eligibility of purchasers:

Answer 12

annually

Question 13

Restricts activities that could be deemed manipulative during an offering.

Answer 13

Regulation M

Question 14

A broker-dealer is ready to issue a favorable research report. Information barriers must exist between what two departments?

Answer 14

Research and trading

Question 15

Frontrunning occurs when _____ are purchased ahead of a block trade that could raise the stock price.

Answer 15

calls

Question 16

The spouse of a brokerage firm employee wants to open a brokerage account so that he can trade individual stocks. If the account is opened at a firm that does not employ her spouse, the employee of the firm is required to:

Answer 16

Obtain the prior written consent of her employing firm in order to open the account.

Question 17

If a temporary hold has been placed on a customer’s account, the firm must provide notice to:

Answer 17

the account owner and the trusted contact person.