General Securities Sales Supervisor (Series10) Practice Exam

What restriction applies to an NYSE-listed issuer placing a buy order close to the market's close?

1. This order can be accepted with no further action necessary

2. This order cannot be accepted

3. This order can only be accepted with the permission of the NYSE

4. This order can only be accepted if the issuer is informed that this transaction may be viewed as "manipulative"

The correct answer is: This order can only be accepted if the issuer is informed that this transaction may be viewed as "manipulative"

When an NYSE-listed issuer places a buy order close to the market's close, they must be aware that such actions can raise concerns about market manipulation. The rationale behind requiring the issuer to be informed that the transaction may be perceived as manipulative is rooted in the regulations designed to maintain market integrity and prevent behaviors that could artificially influence stock prices. The close of trading is a particularly sensitive time, as trading volumes can decrease and activities can have a disproportionate effect on stock prices. Consequently, if an issuer buys shares just before the market closes, it might create the appearance of demand or support for the stock, which could mislead investors about the stock's actual value. To mitigate these risks, regulatory guidance requires that the issuer understand the implications of their trading behavior, ensuring they act transparently and responsibly. While other choices might suggest different conditions for buy orders, the correct approach emphasizes the necessity for the issuer to recognize the potential for their actions to be viewed skeptically, ensuring compliance with ethical standards and regulatory expectations.