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A member firm receives a large block order to buy 100,000 shares of XYZ stock, which is not actively traded. Which customer(s) of the firm can buy XYZ stock prior to the filling of the block trade?


A. The registered representative who received the order
Correct Answer
B. Other customers of the firm who place buy orders, if the firm has information barriers in place
Incorrect Answer
C. Any customer of the firm who places an unsolicited order
D. No customer can buy the stock until the block order to buy is filled

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eooyibo123

Answer:

Other customers of the firm who place buy orders, if the firm has information barriers in place.

Explanation:

FINRA has strict rules against front running, and this is the process by which interested parties place orders for shares beforehand because they have insider information on how a share is going to perform in the future.

This rule is binding on any registered representative.

However if the firm has information barriers in place, any other customers that places a buy order will be assumed not to have insider knowledge of the share's expected performance. The FINRA rule is not binding on them.

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