Stock Advisor Stock Marketing Practices 2

Question 1

Which practice involves artificially inflating a stock's price through false or misleading positive statements before selling at a profit?

Accepted Answer

Pump and dump

Answer

Pump and dump schemes hype a stock to inflate its price, then sell holdings before the price collapses.

Question 2

What does the term 'churning' refer to in brokerage practices?

Accepted Answer

Excessive trading to generate commissions

Answer

Churning is excessive buying and selling by a broker mainly to generate commissions, not to benefit the client.

Question 3

A 'wash sale' occurs when an investor sells a security at a loss and repurchases a substantially identical one within how many days?

Accepted Answer

30 days

Answer

The IRS wash-sale rule disallows the loss if a substantially identical security is bought within 30 days before or after the sale.

Question 4

What is 'front-running' in securities trading?

Accepted Answer

Trading ahead of a known large client order

Answer

Front-running is trading a security based on advance knowledge of a pending large order that will move the price.

Question 5

Which regulatory body primarily oversees the U.S. securities markets?

Accepted Answer

SEC

Answer

The Securities and Exchange Commission (SEC) regulates securities markets and enforces federal securities laws.

Stock Advisor Practice Test