SIE Exam Question 79: Answer and Explanation

Question: 79

A registered representative trading an equity based on non-public information in his or her own account before trading for clients is called ________________.

• A. Churning
• B. Rebalancing
• C. Market timing
• D. Front running

Correct Answer: D

Explanation:

Front running is the prohibited activity of a registered representative trading based on non-public information in his or her own account prior to the information becoming public to other traders. Market timing is the practice of timing or calculating the market's low and high points, buying when it is low and selling when it is high. Rebalancing refers to adjusting a customer's portfolio to return to previously set ratios of investment types. Churning involves a broker, or someone trading on behalf of a customer, processing excessive transactions with the goal of increasing their commissions from trades.