Fraudulent and Prohibited Practices Flashcards
6 cards from real Series 63 – Uniform Securities Agent State Law Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Fraudulent and Prohibited Practices flashcards as text
Under the USA, which of the following constitutes 'market manipulation'?
Answer: Creating false or misleading appearances of active trading through wash sales
Wash sales and matched orders that create artificial appearances of trading activity are forms of market manipulation prohibited under the USA.
What is 'scalping' in the context of securities fraud?
Answer: An investment adviser purchasing securities for personal accounts before recommending them to clients
Scalping occurs when an investment adviser buys a security for their own account and then recommends it to clients, profiting from the price increase caused by client purchases.
Under the USA, which of the following is required if an agent wants to share in the profits and losses of a client's account?
Answer: Written authorization from the client and written authorization from the broker-dealer
Sharing in client account profits and losses requires both written client authorization and written broker-dealer authorization under the USA.
Under the USA, an agent who recommends a security that is unsuitable for a client's investment profile is in violation of what principle?
Answer: The suitability obligation under the anti-fraud provisions
Recommending unsuitable securities violates the suitability standard, which is part of the anti-fraud provisions under the USA.
What must an agent disclose to a client when the agent has a material conflict of interest in recommending a security?
Answer: The existence of the conflict so the client can make an informed decision
Material conflicts of interest must be fully disclosed to clients so they can make informed investment decisions, regardless of the dollar amount involved.
Under the USA, executing trades in a customer's account without prior written or oral authorization is known as what?
Answer: Unauthorized trading, which is a prohibited practice
Unauthorized trading—executing transactions without client authorization—is a prohibited practice under the USA and may constitute fraud.
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