Market manipulators at large



Regulators are constantly on the alert for schemes to manipulate the stock market for profit by unscrupulous individuals. Researchers note that in recent years, algorithmic-based market manipulation has considerably increased, and it is increasingly difficult to identify all cases.



In The United States the Securities and Exchange Commission in October 2024 announced fraud charges against three companies purporting to be market makers and nine individuals for engaging in schemes to manipulate the markets for various crypto assets being offered and sold as securities to retail investors.

As alleged, the schemes were intended to induce investor victims to purchase the crypto assets by creating the false appearance of an active trading market for them. According to the SEC’s complaints, those accused provided market-manipulation-as-a-service, which included generating artificial trading volume or manipulating the price of crypto assets.

In Jamaica, the Securities Act (Conduct of Business) Regulations has a number of provisions aimed at ensuring that investors are protected. Specifically, improper conduct, such as market manipulation and insider trading, is prohibited.

As noted, “Regulation 9 of the COB requires that each licensee maintains standards to ensure fairness in the allocation of investment opportunities to clients and to ensure that illegal trading of securities is not carried out when the dealer is in possession of material information which has not yet been made public.”

As outlined at www.sciencedirect.com, “Manipulated stocks display lower short-term returns and higher probabilities of price reversal than non-manipulated stocks.”

“ Investors who buy manipulated stocks, either at opening prices or volume-weighted average prices, suffer investment losses. Manipulation increases trading activity both on the manipulation day and on the days following manipulation. Manipulation attracts an influx of retail investors, which increases price volatility. Effective external supervision and internal governance can reduce the degree of mispricing,” ScienceDirect comments.

In July 2023 a group of investors made allegations in the complaint against a Junior Market company in Jamaica , ranging from inaccurate and misleading financial reports, delays in financial reporting, reporting false company news, stock price manipulation, mismanagement of receivables due from related parties, and insider trading.

Fraudsters can circulate rumors intended to inflate a stock price or drive it down, depending on whether they are interested in selling or buying. They make use of social media, chat rooms, email campaigns, and phony newsletters.

MM (market manipulation) is also perpetrated through fictitious trades or sham transactions intended to give the appearance of activity or price movement. These trades don't have any change in ownership and carry no financial risk to the trader. Entering a large number of buy or sell orders and then canceling them is one example of fictitious trading.

Price-manipulation schemes can use high volumes of trades to raise or depress prices. Fraudsters may also acquire inactive shell companies with registered shares. They then inflate the value of the shares through a series of fictitious transactions.

The Financial Services Commission outlines that market manipulation and insider trading are activities which subvert the objectives and principles of securities regulation.

Under the FSCs standards to be met by market participants, organizations whose members come into possession of insider information, by virtue of their profession, such as the Jamaica Securities Dealers Association (JSDA), Institute of Chartered Accountants of Jamaica (“ICAJ”), Bar Association and institutional investor organizations such as Insurance companies, Mutual Funds and Pension Funds should play an active role in promoting ethical standards.

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