Stock Advisor Stock Marketing Practices 5

Question 1

What is 'layering' in market manipulation?

Accepted Answer

Placing multiple fake orders at different prices to mislead

Answer

Layering is a form of spoofing where multiple non-bona fide orders are placed at different price levels to create false market depth.

Question 2

A 'blackout period' restricts which activity?

Accepted Answer

Insider trading by company employees

Answer

A blackout period prohibits company insiders from trading shares, typically around earnings announcements.

Question 3

What is the primary risk disclosed in marketing materials for leveraged investments?

Accepted Answer

Amplified losses as well as gains

Answer

Leverage amplifies both potential gains and potential losses, a key risk that must be disclosed.

Question 4

Which practice involves a broker trading against a client's interest for the firm's gain?

Accepted Answer

Conflict of interest

Answer

A conflict of interest arises when a broker's actions benefit the firm at the expense of the client.

Question 5

What must advertisements for securities avoid under FINRA rules?

Accepted Answer

Misleading or exaggerated claims

Answer

FINRA requires that communications with the public be fair, balanced, and not misleading or exaggerated.

Stock Advisor Practice Test