SIE Understanding Trading, Customer Accounts and Prohibited Activities Question 20: Answer and Explanation

Question: 20

Which of the following involves the inappropriate use of material nonpublic information?

• A. Intimidation
• B. Borrowing from customers
• C. Insider trading
• D. Exploitation of specified adults

Correct Answer: C

Explanation:

C: Choice C typically refers to making an illegal trade based on material nonpublic information. Choice A refers to trying to influence another member firm or another member firm's associated person through fear, to change their behavior in the market, but does not necessarily use material nonpublic information. Choice B is restricted by FINRA Rule 3240 but does not necessarily involve the use of material nonpublic information. Choice D is prohibited by FINRA Rule 2165 but does not necessarily use material nonpublic information.