Which of the following terms best describes the act of disseminating false or misleading information to influence security prices and exploit resulting movements?

• A. Painting the tape
• B. Wash trades
• C. Market manipulation
• D. Arbitrage

Answer: (C)

Disseminating false or misleading information to influence security prices and profit from the resulting movements is market manipulation. This term captures the intent to distort the price discovery process by deceiving investors about a stock’s prospects, prompting trades that move the price in the manipulator’s favor. It’s illegal because it undermines fair markets and harms other investors. The other terms describe different ideas: painting the tape involves creating a false impression of activity through trades, rather than spreading misleading information; wash trades are trades that cancel each other out to inflate apparent volume; arbitrage is about profiting from genuine price differences without deception.