Challenge Your Exam Readiness With Our Free Series 65 License Practice Questions

Trading on material, nonpublic information violates federal securities laws and is classified as insider trading. It undermines market fairness by allowing one party to profit or avoid loss based on information unavailable to the public. Option A, front-running, involves trading ahead of client orders for personal gain. Option C, churning, is excessive trading to generate commissions. Option D, selling away, refers to selling securities not recorded on an adviser’s books without firm approval. The Series 65 exam stresses fiduciary duty and ethical conduct. Advisers and representatives must not misuse client or corporate insider information for personal advantage. Violations carry severe civil and criminal penalties, including fines, disgorgement, suspension, or imprisonment. Compliance policies require advisers to implement information barriers, monitor employee trades, and ensure staff training on material nonpublic information (MNPI). Correctly identifying insider trading and distinguishing it from other unethical practices is critical for candidates.