Section 3: Understanding Trading, Customer Accounts and Prohibited Activities

3.3 Prohibited Activities

Practice specifically for the 3.3 Prohibited Activities section of the FINRA SIE Exam. We have 20 specialized questions in this category to help you master the material.

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Authoritative FINRA SIE Study Notes

Key Concepts & Regulatory Highlights

Market manipulation, insider trading penalties, front-running, churning, selling away, sharing in customer accounts, and elder financial exploitation.

📜 Core Regulatory Rules & Requirements

✓Market Manipulation: Painting the tape (fictitious trades), Wash sales, Pump and Dump, Marking the Open/Close, Spoofing, Backing Away (failing to honor firm quotes).

✓Insider Trading (1988 Act): Trading on Material Non-Public Information (MNPI). Both tipper and tippee are liable. Civil penalties up to 3x profits gained or losses avoided (treble damages); criminal penalties up to $5M fine and 20 years imprisonment.

✓Front-Running: Entering a personal trade ahead of a large client block order to profit from the anticipated market move.

✓Selling Away (Rule 3280): Engaging in private securities transactions outside the scope of the broker-dealer without prior written notice and approval.

✓Sharing in Customer Accounts (Rule 2150): Prohibited unless immediate family member OR with prior written firm permission and sharing strictly proportionate to capital contributed.

✓Borrowing / Lending (Rule 3240): Generally prohibited unless customer is immediate family, a lending institution, or personal relationship approved by firm.

✓Financial Exploitation (Rule 2165): Allows placing a temporary hold of up to 15 business days on disbursements from accounts of specified adults (age 65+ or vulnerable).

💡 High-Yield Exam Watchouts

•Representatives cannot guarantee customers against financial loss under any circumstances.

Why Study 3.3 Prohibited Activities?

The 3.3 Prohibited Activities portion of the Security Industry Essentials (SIE) exam is critical for success. Understanding these concepts is not just about passing the exam, but about building a foundation for your career in the securities industry.

Our practice questions are designed to mimic the official FINRA exam format, ensuring you're familiar with the wording and complexity you'll encounter on test day.

Sample Concepts Covered

Concept 1

Spreading false rumors to influence the price of a stock is known as:

Concept 2

Trading on material, non-public information is called:

Concept 3

The violation of 'freeriding' occurs when an investor:

Concept 4

A registered representative executing an excessive number of trades in a client's account to generate commissions is guilty of:

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