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 is NOT considered a fraudulent act?
Answer: Charging a disclosed, reasonable commission for executing a trade
Charging a disclosed and reasonable commission for executing a trade is a legitimate business practice and is not fraudulent under the USA.
What is a 'Ponzi scheme' in the context of securities fraud?
Answer: A fraudulent investment scheme that pays returns to earlier investors using capital from newer investors
A Ponzi scheme is a fraudulent operation where returns to earlier investors are funded by capital from new investors rather than legitimate investment profits.
Under the USA, which of the following describes 'painting the tape'?
Answer: Executing a series of transactions to create the illusion of active trading and manipulate price
Painting the tape involves executing a series of buy and sell transactions between related parties to create the false appearance of high trading volume.
Under the USA, 'marking the close' refers to which prohibited practice?
Answer: Buying or selling securities near the end of the trading day to artificially influence the closing price
Marking the close is a form of market manipulation where trades are executed near the market close to artificially affect a security's closing price.
Under the USA, misleading omissions of material facts in connection with securities transactions are considered what?
Answer: Fraudulent acts subject to civil and criminal penalties
Omissions of material facts are fraudulent acts under the USA regardless of whether the omission was intentional, and they can result in civil and criminal liability.
Under the USA, an agent who makes a recommendation without having a reasonable basis to believe it is suitable for the customer violates which standard?
Answer: The suitability standard, which is an anti-fraud obligation
Making recommendations without a reasonable basis for believing they are suitable for the specific customer is a violation of the suitability standard under the anti-fraud provisions.
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