FMA Warns Individual For Market Manipulation

The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – has issued a warning to an individual online trader for suspected market manipulation.

Following an investigation, the FMA concluded that the individual likely breached the Financial Markets Conduct Act by engaging in trading which was likely to have the effect of creating a false or misleading appearance regarding the price of shares for a listed company.

The alleged conduct occurred over two weeks in November 2021. During that period, the individual used his partner’s Sharesies account to place eight sell orders for the shares. During the same period, he used his own Sharesies account to place 11 buy orders and his partner’s account to place another four buy orders. A number of the buy orders had higher volumes than the prevailing best ask volume and higher price limits than the prevailing spread. These order terms allowed the key buy orders to clear the volume at the existing best ask price, then trade into the volume at the next higher price step. As a result, market spread and/or the last trade prices for the shares moved higher on at least 10 occasions.

The FMA determined a formal warning was the appropriate and proportionate response, after considering the size and value of the trading, the individual’s personal circumstances and trading history, the public interest, the seriousness of the conduct, the extent of the harm caused and that the conduct occurred over a relatively isolated period. The person and the listed company will not be named.

FMA General Counsel, Liam Mason, said: “Market manipulation is a serious breach of the law, even when the volume and value traded is low. New Zealand’s market manipulation provisions seek to ensure there is genuine supply and demand in our equity markets and play a critical role in preserving the integrity of the share market.

“This individual’s trading can undermine the integrity and reputation of our markets and can erode investor confidence. The FMA will continue to investigate and take appropriate action against this type of activity.”

Sharesies appropriately detected and reported the conduct to NZ RegCo and the FMA, and co-operated with the FMA’s inquiries. The FMA has informed NZ RegCo of the warning.

More information for investors about market manipulation can be found on the FMA website.

Read the warning letter.

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