The Australian Securities and Investments Commission (ASIC) has warned coordinated efforts via social media platforms to manipulate stock prices using ‘pump and dump’ strategies may breach the law.
The corporate watchdog stated it had seen a “concerning trend” where social media posts were being used to ‘pump’ the share price of a stock by promoting it online or spreading false news about its prospects before moving to ‘dump’ the shares and profit from the artificially created price increase.
“ASIC has recently observed blatant attempts to pump share prices using posts on social media to announce a target stock, a designated time to buy and a target price or percentage gain to be reached before dumping the shares. In some cases, posts on social media forums may mislead subscribers by suggesting the activity is legal,” the regulator said.
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.”
The social media posts claimed the activity is legal, but ASIC warned participants of market manipulation had breached the Corporations Act, with fines accumulating to over $1 million and up to 15 years in prison.
“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 (Australian Securities Exchange) equity market on a real-time basis,” Armour said.
“Market participants, as gatekeepers, should take active steps to identify and stop potential market misconduct. They should consider the circumstances of all orders that enter a market through their systems and be aware of indicators of manipulative trading.”
While the corporate watchdog will continue to monitor trading on Australian licensed markets, it has advised participants to remain cautious of groups of clients that have traded in the same stock, opened accounts at a similar time, been referred by the same person, have the same account contact details and transfer funds between themselves.
Participants who notice such activity are expected to submit a suspicious activity report and investors have been encouraged to report misconduct to ASIC.
In addition, ASIC advised listed entities to report suspicious activity and sudden or unexplained price changes to the ASX or the regulator.