Market manipulation refers to any intentional activity that distorts or manipulates the normal functioning of financial markets with the aim of gaining an unfair advantage. In Australia, market manipulation is illegal and is subject to strict regulations enforced by the Australian Securities and Investments Commission (ASIC). ASIC is the primary regulatory body responsible for maintaining fair and transparent financial markets in Australia.
Market manipulation encompasses a wide range of activities aimed at artificially influencing the supply, demand, or price of financial instruments. It involves deceptive practices that create a false or misleading appearance in the market, thereby compromising the integrity of the market and investor confidence. Examples of market manipulation include spreading false rumours, engaging in insider trading, wash trading, pump and dump schemes, and front running.
When facing a charge of market manipulation, individuals or entities may employ certain legal defences to contest the allegations. Specific legal defences can vary depending on the jurisdiction and the circumstances of the case. However, here are some common legal defences that might be applicable:
Lack of Intent
Market manipulation charges often require proof of intent to manipulate the market. If the accused can demonstrate that their actions were not intentional or that they had no knowledge of the consequences of their actions, it may be a valid defence. They may argue that their conduct was based on a genuine belief in the market’s direction or that they were unaware of the impact of their actions.
Legitimate Trading Strategy
If the accused can establish that their actions were part of a legitimate trading strategy, it may serve as a defence. They would need to demonstrate that their trading activities were conducted in accordance with commonly accepted trading practices and were not intended to manipulate the market.
Duress or Coercion
If the accused can establish that they engaged in market manipulation under duress or coercion, it may serve as a defence. They would need to demonstrate that they were forced or compelled by another party to engage in the manipulative activities against their will.
Some market manipulation charges may involve allegations of false or misleading disclosures. In such cases, a defence could involve showing that the accused made all necessary disclosures required by law and did not engage in any fraudulent or deceptive practices.
Accordingly, it’s important to seek legal advice from lawyers who specialises in securities law or financial regulations to assess the specific circumstances of the case and determine the most appropriate legal defences to pursue.
If individuals or entities are found guilty of market manipulation, they can face both civil and criminal penalties. The penalties can vary depending on the severity of the offense and whether it is pursued as a civil or criminal matter. Here are some potential penalties:
Civil penalties for market manipulation can include fines imposed by the court. The maximum civil penalty for individuals is currently AUD 1.05 million per contravention, and for corporations, it can be up to the greater of AUD 10.5 million, three times the benefits gained from the contravention, or 10% of the annual turnover.
Market manipulation can be prosecuted as a criminal offense. If found guilty, individuals can face imprisonment and/or substantial fines. The specific penalties for criminal offenses are determined by the court based on the circumstances of the case.
Yes, stock market manipulation is illegal in Australia. The Corporations Act 2001, which governs the conduct of participants in the Australian financial markets, prohibits market manipulation in relation to securities.
ASIC has the power to investigate and take legal action against individuals or entities found to be engaged in market manipulation activities in the stock market. Penalties for market manipulation can include fines, imprisonment, and civil remedies.
Pump and Dump Schemes
This involves artificially inflating the price of a stock or cryptocurrency by spreading positive rumours or false information, enticing unsuspecting investors to buy at the inflated price. Once the price reaches a peak, the manipulators sell their holdings, causing the price to plummet, resulting in significant losses for those who bought at the inflated price.
This occurs when individuals with access to non-public, material information about a company trade based on that information. By buying or selling securities based on insider knowledge, they can profit or avoid losses at the expense of other investors who are not privy to the same information.
This manipulation technique involves an individual or group trading with themselves to create the illusion of increased trading volume and market interest. It can be used to inflate the perceived demand for a particular security or cryptocurrency, attracting other investors to participate.
Spoofing involves placing a large buy or sell order with the intention of cancelling it before the order is executed. This deceptive practice creates a false impression of market demand or supply, influencing other traders to act based on the false information.
Front running occurs when a broker or trader executes orders on a security for its own account based on advance knowledge of pending orders from its clients. This unfair advantage allows the front runner to profit from the anticipated price movement caused by the pending orders.
These examples demonstrate the various techniques used by individuals or entities to manipulate financial markets for personal gain. Market manipulation is illegal and can result in severe penalties and reputational damage for those involved.
Lyons Law Group comprehends the intricacies involved in market and stock manipulation across its various manifestations, boasting a demonstrated history of successfully defending against such allegations.
We take pride in our unwavering commitment to vigorously safeguarding your rights. Whether you face formal accusations or suspect your involvement in market manipulation, our team of corporate crime lawyers possesses the expertise necessary to support your defence case.