SIE (Securities Industry Essentials) Practice Exam

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Front-running refers to the practice of:

Providing financial advice without a license
Trading ahead of a customer's block order
Running a front company for money laundering
Executing trades at the beginning of the trading day

The correct answer is: Trading ahead of a customer's block order

Front-running refers to the practice of trading ahead of a customer's block order. This means that someone with knowledge of a large trade coming into the market will buy or sell securities for their own benefit before executing the client's order, potentially causing the market price to move in their favor. Option A, providing financial advice without a license, is known as unauthorized practice of law and is illegal. Option C, running a front company for money laundering, refers to setting up a legitimate business as a cover for illegal activities and is not related to trading. Option D, executing trades at the beginning of the trading day, is not explicitly related to front-running and may also refer to a variety of other trading strategies.