Market Manipulation
Types of Market Manipulation
There are several types of market manipulation, including:
- Pump and Dump: This is a scheme where individuals or groups artificially inflate the price of a stock by spreading positive rumors or false information about the company. Once the price has been artificially pumped up, the manipulators sell their shares at the higher price, causing the stock price to plummet and leaving other investors with significant losses.
- Front Running: This occurs when a broker or trader executes orders on a security for their own account before executing orders for their clients. By taking advantage of advance knowledge of pending orders, the manipulator can profit from the price movements caused by executing those orders.
- Spoofing: Spoofing involves placing large orders to buy or sell a security with the intention of canceling them before they are executed. The manipulator aims to create a false impression of supply or demand, tricking other market participants into buying or selling at artificial prices. Once others have reacted to the false order, the manipulator cancels their own order.
- Churning: Churning occurs when a broker excessively trades a client's account to generate commissions without regard to the client's investment objectives. It's a form of excessive trading that benefits the broker at the expense of the client.
- Insider Trading: Insider trading involves trading in securities based on material non-public information. Individuals with access to confidential information, such as corporate insiders or professionals, use that information to make trades that give them an unfair advantage over other investors.




These are just a few examples of market manipulation. It's important to note that market manipulation is illegal and undermines the integrity and fairness of the financial markets. Regulatory bodies like the SEC and FINRA have rules and regulations in place to detect and prevent these manipulative practices.
Front Running
What is Front Running?
Front running refers to the unethical practice where a broker or trader takes advantage of non-public information about impending trades to execute their own personal trades before executing the client's orders. In front running, the individual places their own interests ahead of the client, seeking to profit from the anticipated market impact of the client's trade. This practice is considered a form of market manipulation and a breach of fiduciary duty. It undermines the integrity of the financial markets and erodes trust between clients and their brokers or traders. Regulatory bodies such as FINRA have established rules, such as FINRA Rule 5270, to prohibit front running and protect the interests of investors.



Executing Orders
Prohibited Activities Related to Executing Orders
Prohibited activities related to executing orders encompass a range of unethical practices that undermine fair and transparent market operations. These activities involve improper handling of client orders, breaching fiduciary responsibilities, and manipulating order execution for personal gain. Such activities can include front running, churning, and engaging in manipulative trading strategies. Regulatory bodies like FINRA have established rules, such as FINRA Rule 5290, to protect investors and maintain the integrity of the financial markets. By prohibiting these activities and enforcing strict guidelines, regulators aim to foster investor confidence, ensure equitable treatment, and promote a level playing field for all market participants.


Dangerous Investments
Prohibited Activities: Dangerous Investments
Prohibited activities related to dangerous investments encompass practices that involve promoting, selling, or engaging in high-risk or fraudulent investment schemes. These activities target unsuspecting investors by offering unrealistic returns, withholding crucial information, or misrepresenting the risks involved. Examples of dangerous investments include offshore investments, promissory notes, excessively high rates of return, and Nigerian advance fee letters. Regulatory bodies, such as FINRA, have implemented stringent rules and regulations to protect investors from falling victim to such schemes. These regulations aim to ensure that financial professionals adhere to ethical standards, provide accurate and transparent information, and prevent the exploitation of investors through dangerous or fraudulent investment opportunities. By actively monitoring and enforcing these prohibitions, regulators strive to safeguard investor interests and maintain the integrity of the financial markets.

Insider Trading
Prohibited Activities: Insider Trading
Prohibited activities related to insider trading involve the illegal buying or selling of securities based on non-public material information. Insider trading occurs when individuals, such as corporate insiders, employees, or other individuals with access to confidential information, use that information to gain an unfair advantage in the financial markets. It undermines the principle of fair and equal access to information for all investors and erodes market integrity. Regulatory bodies, including the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA), have implemented strict rules and regulations to prevent insider trading and protect the integrity of the securities market. These regulations require individuals to maintain confidentiality, prohibit the use of material non-public information for personal gain, and impose severe penalties, both criminal and civil, for violations. By enforcing these prohibitions, regulators aim to ensure a level playing field and promote investor confidence in the fairness and transparency of the financial markets.

Documentation
Documentation Activities
Prohibited activities related to documents involve the improper handling, falsification, withholding, or failure to respond to regulatory requests for important documents within the financial industry. Documents play a crucial role in maintaining transparency, compliance, and regulatory oversight. It is essential for individuals and firms to accurately create, maintain, and disclose documents in accordance with regulatory requirements. Prohibited activities in this context include the intentional alteration, fabrication, or destruction of documents to misrepresent information or conceal potential violations. Additionally, withholding or failing to provide requested documents to regulatory authorities can hinder investigations and impede the enforcement of rules and regulations. These prohibited activities undermine the integrity of the financial industry, and regulators such as the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) enforce strict rules to ensure proper document management and compliance. By promoting the appropriate handling and disclosure of documents, regulators aim to maintain market integrity, protect investors, and deter fraudulent practices within the industry.




Other Prohibited Activities
Other Types of Prohibited Activities
Prohibited activities in the financial industry encompass a wide range of practices that are deemed unethical, deceptive, or in violation of regulatory guidelines. These activities extend beyond market manipulation, insider trading, and document-related offenses. They can include activities such as spreading market rumors, engaging in excessive trading, making the market "open" or "close," participating in political contributions that may influence securities transactions, engaging in free riding, exploiting seniors, and more. These prohibited activities undermine the fair and transparent functioning of financial markets, erode investor confidence, and potentially lead to financial harm. Regulatory bodies such as the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have established rules and regulations to combat and prevent these prohibited activities, ensuring the integrity of the financial industry and safeguarding the interests of investors.







