SIE Exam Question 385: Answer and Explanation

Question: 385

A large institutional client of yours has discussed their imminent intent to place a very large purchase order for the stock of XYZ. As the agent of record, you place an order immediately in your own account prior to placing the client's order.

• A. this is known as front-running
• B. this is a manipulative act
• C. this is only permitted with permission of your principal
• D. this is only permitted with written authorization from the client

Correct Answer: A

Explanation:

A: Front running is the illegal placing of an order just prior to placing a client's order so as to take advantage of the anticipated market price move.