Regulation in the Australian Market Place

Who safeguards your share investment or share trading?

The Corporations Act (2001) is administered by ASIC - The Australian Securities and Investments Commission.

This Australian government authority is responsible for enforcing and regulating company and financial services laws. In addition the Australian Securities Exchange (ASX) also has its own market rules, although it is a contentious issue as to whether the ASX should both regulate and profit from the stock market. Following the announcement by the ASX that they are going to set-up an internal unit to specifically target insider trading, it is probably timely today to have a broad look at the rules that govern your trading on the ASX.

Guidelines:

• Market manipulation – Doing anything that is likely to create or maintain an artificial price. False trading – The creation of a false or misleading appearance of the active trading or the price of securities.
• Market rigging – Using fictitious or artificial transactions to manipulate the market price of securities, or to cause them to fluctuate.
• False and misleading information – i.e. Using misleading statements and information whether you do not know or care that the statements are false.

Some Examples of Market Manipulation;

• Wash sales - These are sales involving no change in beneficial ownership. Where a person or their associates hold the security before and after the transaction. These create a false and misleading appearance of active trading.
• Matched orders - Somebody buying a specific quantity of a security at a specific price when the same person (or an associate) is selling almost the same quantity at the same price.
• "Pooling" - A collection of 4 or more individuals who, together, create a pool of funds which is used to buy and sell a security within the group to boost turnover. This would raise the price and enable the group to sell at a profit.
• Organised 'runs' - A group of people creating and spreading rumours to bring about a sharp increase in the price of securities. Thereby attracting more people into the market and pushing the price up further. "Pump and dump" - Creating and feeding a rumour, normally by using spam e-mail, bulletin boards and chat rooms to 'pump up' a stock by posting false and misleading statements. The organiser will then dump their holdings on to the market when the price has risen.