Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

What constitutes Market Manipulation?

1. An attempt to enhance stock prices legally

2. A deliberate interference with market operations

3. A strategy to boost investor confidence

4. A regulatory requirement in market trading

The correct answer is: A deliberate interference with market operations

Market manipulation is identified as deliberate interference with the normal operation of the market. This involves tactics aimed at creating artificial price levels or volumes to mislead other traders about the true state of the market or the underlying asset's value. Such actions can include practices like pump and dump schemes, where the price of a security is artificially inflated to sell it at a profit before it plummets, or spreading false information to influence market behavior. The essence of market manipulation lies in the intent to affect the market in a deceptive way, which is why it is deemed unethical and illegal in most jurisdictions. Understanding this concept is crucial for anyone involved in trading and investment, as it protects the integrity of the financial markets and maintains fair conditions for all investors. The other options do not accurately denote market manipulation. Enhancing stock prices legally refers to legitimate practices and strategies of valuing a company and does not imply deception. Similarly, boosting investor confidence through genuine means does not equate to manipulation. Finally, a regulatory requirement in market trading focuses on compliance aspects rather than the fraudulent practices that characterize market manipulation.