hard · CFA Level I ethics
Nadir Components' stock is illiquid. To help a client sell a large block without a price drop, broker Sarah Jenkins executes a series of 'wash trades' (buying and selling between accounts she controls) to create the appearance of high volume. Separately, Sarah's husband inherits a significant position in Nadir Components. Sarah continues to issue 'Buy' recommendations on Nadir without mentioning the inheritance. Sarah's execution of 'wash trades' is:
- Permissible if the trades do not result in a significant change in the stock price.
- A violation of Standard II(B) Market Manipulation.
- Permissible because her intent was to help a client achieve the best execution price.
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