SIE Exam Question 558: Answer and Explanation

Question: 558

Which of the following is a fraudulent investment operation where the operator provides fabricated reports and generates investment returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profits of financial trading?

• A. Pump and dump scheme
• B. Ponzi scheme
• C. Matrix scheme
• D. Bucket shop scheme

Correct Answer: B

Explanation:

A Ponzi scheme is a fraudulent investment operation where the operator provides fabricated reports and generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profits of financial trading.