Question of the Week

Sometimes investment banking firms allocate shares of hot issues to the personal accounts of corporate officers with the intentions of generating more future business. The corporate officers then sell the issues that day to make a quick profit. This is known as:

a) Spinning
b) Churning
c) Short-selling
d) Twisting

Answer: The correct answer is a)

Spinning is the act of selling hot issues to the personal accounts of corporate officers which in turn sell the issues immediately that day to make a quick profit. The intention of this strategy is to build trust with the officials in hopes of influencing them to direct future business to the firm.