What is Wash Trading ?

Wash trading is a process whereby a trader buys and sells a security for the express purpose of feeding misleading information to the market. In some situations, wash trades are executed by a trader and a broker who are colluding with each other, and other times wash trades are executed by investors acting as both the buyer and the seller of the security. Wash trading is illegal under U.S. law, and the IRS bars taxpayers from deducting losses that result from wash trades from their taxable income.

What is Cross Trading?

Cross Trading is conducting Wash Trading in two different sending accounts – that is buying a security in one account and selling the same security in another account owned by the same beneficial owner, at the same time and at the exact same price. 

**It is important to note that both Wash Trading & Cross Trading are prohibitive trading schemes which give the appearance of trading, but no bona fide trading has occurred as there were no changes in beneficial ownership on both sides of the trades.  Generally, we will send out account alerts and/or due diligence questionnaires upon the initial occurrence; any subsequent occurrences could lead to account trading restriction.