Front Running
Frier & Levitt, LLC represents individuals in arbitrations before the Financial Industry Regulatory Authority (“FINRA”) involving disputes arising out of an illegal broker/dealer practice called “Front Running.”
What is Front Running?
Front running is the illegal and unethical practice of a broker/dealer executing orders on a security for their own account (and thus affecting prices) before filling orders previously submitted by their customers. After the broker/dealer has made his original transactions, he/she can expect to close out a position at a profit based on the new price level. Front running may involve either buying (where the broker/dealer buys for their account, driving up the price before filling customer buy orders) or selling (where the broker/dealer sells for their own account, driving down the price before filling customer sell orders).
For example, if a broker/dealer buys 20,000 shares of a stock for $100 per share just before buying a large block of 400,000 shares for a customer, they may drive the price up to $102 per share. If the broker is able to sell their newly purchased shares at $101.75, they will have made $35,000 in a few minutes. This $35,000 is likely to be only part of the additional cost to the customer’s purchase caused by the broker’s self dealing.
The practice of front running is expressly prohibited by FINRA regulations and is a violation of federal securities laws.
For more information about the illegal practice of front running, or to discuss how Frier Levitt, LLC can assist you in obtaining legal relief against your broker/dealer, please feel free to call us at (973) 618-1660, or toll-free at (888) LEVITT1 (888-538-4881).