Series 3: 7.3.7.1. Fraudulent Transactions

Taken from our Series 3

7.3.7.1. Fraudulent Transactions

No registered firm or associated person may cheat or defraud any person or attempt to do so. Nor may they make any false report to any person or willfully deceive him in regard to any order. A person refers to private or government institutions, as well as individuals. Some examples of fraudulent trading behavior are identified below.

Churning. Churning is excessive buying and selling in a customer’s account to generate commissions for the broker without regard to the customer’s best interest.

Wash sale. When an investor sells securities or futures contracts at a loss and then buys back the same or substantially identical securities or contracts within 30 days, the investor cannot use the capital loss to offset taxable gains. This is considered a wash sale, according to IRS rules. Moreover,

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