Respuesta :
Other customers of the firm who place buy orders, if the firm has information barriers in place.
What is Financial Industry Regulatory Authority?
A private American corporation known as the Financial Industry Regulatory Authority controls member brokerage companies and exchange markets through self-regulation. The self-regulatory FINRA is in charge of overseeing and licensing broker-dealers, but it can only impose its rules on members. The SEC is also in charge of FINRA. In summary, the SEC is more concerned with overseeing individual investors, whereas FINRA is responsible for overseeing brokerage houses and stockbrokers.
Front running, in which interested parties place orders for shares in advance because they have insider knowledge about how a share will perform in the future, is strictly prohibited by FINRA. Any registered representative is required to abide by this rule.
However, if the company has information barriers in place, any additional clients who place a buy order will be regarded as lacking intimate knowledge of the anticipated performance of the share. They are not subject to the FINRA rule.
Hence, Other customers of the firm who place buy orders, if the firm has information barriers in place. Option B is correct.
The complete question is,
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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