ASIC has warned of an increase in illegal ‘pump and dump’ campaigns that are popping up across social media channels, and asked market participants to actively report suspicious activity.
The corporate regulator put out a media release saying it noted a “concerning trend” of social media posts being used to inflate the price of a stock so it can subsequently be sold at a premium.
“They do this by using social media and online forums to create a sense of excitement in a stock or spread false news about the company’s prospects,” ASIC explained. “They then sell (or ‘dump’) their shares and take a profit, and other shareholders suffer as the share price falls.”
The strategy has been an emerging concern for the regulator in recent years, which has escalated as opportunists have become more blatant with the campaigns.
Market manipulation is an illegal activity and can attract fines of over $1 million as well as up to 15 years imprisonment.
According to commissioner Cathie Armour, ASIC is working closely with market operators to identify and disrupt ‘pump and dump’ campaigns.
She also delivered a clear warning to the people behind such efforts.
“We will continue to target actions that threaten the integrity of markets and to take enforcement action where appropriate,” Armour stated. “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.”
Armour asked advisers and investors to be aware of the trend and report an activity that could be seen as market manipulation. Be on the look out for groups of clients trading “in the same stock, in the same direction, at around the same time”, she said.
“Market participants, as gatekeepers, should take active steps to identify and stop potential market misconduct,” Armour continued. “They should consider the circumstances of all orders that enter a market through their systems, and be aware of indicators of manipulative trading.”