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Marking the Close: Legal Insights into a Controversial Trading Practice
Definition & Meaning
Marking the close refers to the practice of making late-day trades in a security to artificially inflate its closing price. This is typically done by buying the security at a significantly higher price than its current market value just before the trading day ends. The intention behind this practice is to create the appearance that the security is more valuable than it truly is, which can mislead investors and affect market perceptions.
Table of content
Legal Use & context
Marking the close is primarily relevant in the context of securities regulation and market manipulation laws. It falls under the purview of the Securities and Exchange Commission (SEC) and is considered illegal as it undermines market integrity. Users involved in trading or investing in securities should be aware of this practice to avoid legal repercussions. Legal templates and resources from US Legal Forms can assist users in understanding their rights and responsibilities regarding securities trading.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A trader places a large order to buy shares of Company A just minutes before the market closes. This order causes the stock price to spike, making it look like Company A is experiencing increased demand, even though the trading volume was low throughout the day.
Example 2: A brokerage firm instructs its employees to buy a particular stock at inflated prices before the market closes to enhance the perceived value of their portfolio. (hypothetical example)
Relevant laws & statutes
Marking the close is addressed under various securities laws, including:
Securities Exchange Act of 1934
SEC Rule 10b-5, which prohibits fraudulent activities in connection with the purchase or sale of securities.
Comparison with related terms
Term
Definition
Difference
Market Manipulation
Any action taken to interfere with the free and fair operation of the market.
Marking the close is a specific type of market manipulation focused on closing prices.
Wash Trading
A practice where a trader buys and sells the same security to create misleading activity.
Wash trading involves both buying and selling, while marking the close focuses solely on buying to inflate prices.
Common misunderstandings
What to do if this term applies to you
If you suspect that you or someone else may be involved in marking the close, it is crucial to seek legal advice immediately. Understanding your rights and obligations is essential. You can also explore US Legal Forms for templates and resources that can help you navigate securities regulations effectively. If the situation is complex, consulting with a legal professional is highly recommended.
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