Powered by MOMENTUM MEDIA
subscribe to our newsletter

ASIC issues warning on social media led ‘pump and dump’ campaigns

Cathie Armour
Tony Zhang
24 September 2021 — 2 minute read

The Australian Securities and Investments Commission (ASIC) has seen a concerning trend of social media posts being used to coordinate “pump and dump” activity in listed stocks, which may amount to market manipulation in breach of the Corporations Act 2001.

“Pump and dump activity occurs when a person buys shares in a company and starts an organised program to seek to increase (or “pump) the share price, according to ASIC.

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. They then sell (or dump) their shares and take a profit, and other shareholders suffer as the share price falls.

Advertisement
Advertisement

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.

“If an investor decides to buy shares as part of one of these campaigns, they may become the victim. The people behind the campaign may start dumping their shares and taking profits before they reach the target price,” the regulator warned.

“Market manipulation is illegal. It can attract a fine of over $1 million and up to 15 years imprisonment. ASIC takes breaches of the market manipulation provisions seriously.”

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,” Ms Armour said.

“ASIC monitors trading on Australian licensed markets through its sophisticated real-time surveillance system and by integrating trade data with data from third parties. This enables ASIC to see underlying clients, to identify networks of connected parties, and to analyse trading patterns.

“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.”

“Participants should be on the lookout for groups of clients who trade in the same stock, in the same direction and around the same time. They may have opened accounts at a similar time, been referred by the same person, have the same account contact details, or transfer funds between themselves.”

ASIC said it expects participants to promptly submit suspicious activity reports where they see this type of activity. Investors and consumers are also encouraged to report misconduct to ASIC.

Listed entities have a role to play in maintaining the integrity of our markets. They should report any suspicious activity they detect in their listed securities to the ASX or ASIC. This includes where there are sudden and unexplained price moves.  

ASIC issues warning on social media led ‘pump and dump’ campaigns
cathie armour smsf
smsfadviser logo

Are you up to date with the legislative changes from 1 July? Contribution cap increases, super guarantees, age increases, SG rate increases. The budget announcement changes. Don’t be caught off guard by your clients’ questions. Prepare for any scenario with the SMSF Foundations course. 21 CPD hours available. Learn more

Arm yourself with the critical information that you need to ensure you and your clients continue to thrive in today’s changing environment at the free-to-stream SMSF Adviser Technical Strategy Day. Live streamed directly to you in October over three days, this event is jam-packed with expert-led sessions to arm you for success by providing the latest updates on regulatory and legislative changes impacting SMSFs. Secure your free spot today, visit www.smsfstrategyday.com.au

join the discussion

Latest poll

Do you have clients that are aged 65 or 66 planning to trigger the bring forward rules?

SUBSCRIBE TO THE
SMSF ADVISER BULLETIN

Get the latest news and opinions delivered to your inbox each morning

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.