ASIC warns of market manipulation via social media-driven schemes

The Australian Securities and Investments Commission (ASIC) has warned that the use of social media to co-ordinate “pump and dump” schemes may amount to market manipulation.

“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,” the regulator said.

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Noting that the proliferation of these posts may mislead some to assume such activity is legal, ASIC reminded potential investors that such behaviour may constitute market manipulation and a breach of the Corporations Act.

The regulator said that it takes such breaches of the law very seriously, levying fines over $1 million and penalties of up to 15 years of imprisonment.

ASIC also warned that those looking to take advantage of such schemes can easily become victims should the figures behind the campaign dump their shares earlier than expected.

ASIC commissioner Cathie Armour revealed that the regulator has been working with market operators behind the scenes to identify and disrupt pump-and-dump campaigns.

“We will continue to target actions that threaten the integrity of markets and to take enforcement action where appropriate,” she said. 

Ms Armour said that the regulator expects 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.

Although ASIC already monitors Australian traders via a system of in-house and integrated surveillance mechanisms, she called on market participants to take a more active role in identifying and preventing 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,” Ms Armour said.