ASIC Targets Illegal Market Manipulation Activities

ASIC has warned of market manipulation attempts via social media in the listed stocks market, which may constitute a breach of the Corporations Act 2001.

ASIC has noted an increasing trend of ‘pump and dump’ activities taking place on social media. This generally involves a person buying shares in a company, and then engaging in an organised program of social media posts and activity in online forums to generate excitement about the stock, or to spread false news about its prospects. The person then sells their shares at a profit, leaving other investors to suffer a loss as the share price falls.  

A detailed report was released in July 2022 covering ASIC’s observations of these types of schemes.

ASIC Commissioner Cathie Armour said ‘ASIC has been working closely with market operators to identify and disrupt pump and dump campaigns, and we will continue to target actions that threaten the integrity of markets and to take enforcement action where appropriate. We expect anyone involved in these campaigns to recognise the potential impact on market integrity and to be aware ASIC monitors all trading on the ASX equity market on a real time basis.’

ASIC has also warned that carrying out activities with the effect of market manipulation is a criminal offence with potential a conviction of 15 years’ imprisonment and a fine of more than $1 million.

Suspicious Activity Reports

ASIC expects market participants to promptly submit suspicious activity reports to ASIC where they discover this type of market manipulation or sudden or unexplained price moves. Investors and consumers can also submit reports of misconduct to ASIC.

ASIC is always interested to receive reports of share market misconduct, however those lodging the report will not necessarily receive any feedback from ASIC. This is due to a variety of factors, most specifically because making a public comment may jeopardise any action ASIC may take and may affect the market.

Recent prosecutions by ASIC

ASIC has prosecuted a number of cases where individuals have been prosecuted and convicted of market manipulation charges, including directors of listed companies. These include the following:

Matter

Conduct

Penalty

Avrohom Kimelman: director of Quantum Resources Ltd (Quantum)

Insider trading and market manipulation

*procuring shares with information not available to the market

*seeking to manipulate the stock price

18 months imprisonment, to be released immediately upon entering into a $5000 recognizance and an undertaking to be of good behaviour for two years.

Zhonghan Wu: former chief financial officer of Traditional Therapy Clinics Limited (TTC)

Market manipulation

*multiple transactions across 4 accounts which had the effect of creating an artificial stock price

Fraud

1 year and 10 months imprisonment for market manipulation

Community Corrections Order of 2 years and 6 months for fraud offences

Gabriel Govinda

Market manipulation

*trading between accounts he controlled (held in the names of friends or relatives)

*using fake, prop or dummy bids to increase perceived demand (and price) of stocks

Adjourned to 2 December 2022

Dylan Christopher Rands, former dealer and portfolio manager at Regal Funds Management Pty Ltd (Regal)

 

Market manipulation

*entering into uncommercial transactions which created, or were likely to create, an artificial stock price

*creating a false or misleading appearance of active trading

Five year banning order

Background

Market manipulation is prohibited under section 1041A of the Corporation Act 2001 and is a serious criminal offence under section 11.5(1) of the Criminal Code.

While ASIC has taken actions to investigate and interfere market manipulation campaigns through monitoring Australian traders via a system of in-house and integrated surveillance mechanisms, it encourages market participants to take active steps to identify and stop potential market misconduct.

Further Reading

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