Social media platforms are increasingly being used to coordinate pump-and-dump schemes, says the Australian Securities and Investments Commission (ASIC).
The regulator said it’s seen “blatant” campaigns to pump up stock prices on social media, with posts that name a target stock, a planned time to buy and a target price before starting to dump the stock.
“In some cases, posts on social media forums may mislead subscribers by suggesting the activity is legal,” the ASIC said.
At the same time, investors joining a campaign may end up victimized by it, the regulator warned. For instance, the perpetrators of the scheme may begin dumping the stock before it reaches the publicly-posted stock price, exposing naive online investors to trading losses.
To help combat the problem, the ASIC called on industry firms to act as gatekeepers, and actively engage in identifying and preventing potential manipulative trading.
The ASIC said that firms “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 commissioner, Cathie Armour, said the regulator 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.”
The regulator also said that it expects firms, issuers and investors alike to report misconduct.
“We expect anyone involved in these campaigns to recognize 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 added.