SIE Exam Question 154: Answer and Explanation

Question: 154

Which of the following are prohibited activities?

• A. Churning
• B. Front running
• C. Insider trading
• D. All of the above

Correct Answer: D

Explanation:

Churning, front-running, and insider trading are all prohibited activities. Churning involves a broker, or someone trading on behalf of a customer, processing excessive transactions with the goal of increasing their commissions from trades. Front-running is an unethical, and generally illegal, activity in which a broker makes advantageous trades by using non-public information about an impending transaction. Insider trading is the illegal use of non-public information about a company by a person within that company to profit in the stock market.