New Securities Law

for: Investment Advisers

and: Market Participants

Overview

Market manipulation

Market manipulation is behaviour or practices likely to give a false or misleading impression about the supply, demand, price or value of securities traded on a registered exchange.

The new market manipulation law prohibits:

making false or misleading statements or spreading information which is likely to induce a person to trade or which might affect the price of the securities; and
creating a false or misleading appearance of securities trading.

Any trade that does not result in a change of beneficial ownership will be presumed to give a misleading appearance of trading activity unless it can be shown that the transaction took place for a legitimate reason. This also applies where a person places matching buy and sell orders for a security.

Penalties for breaching the market manipulation laws will be similar to those for insider trading and include criminal offence provisions.

There is also a broad-ranging prohibition against any conduct related to any dealings in securities that is likely to mislead or deceive. This is similar to the prohibition in the Fair Trading Act 1986 for misleading or deceptive conduct.

The regulations set out procedures to provide a safe habour for market stabilisation after an initial public offer. The regulations also clarify that short selling and crossing trades are not, in and of themselves, considered to be market manipulation.

Anyone who engages in misleading or deceptive conduct can be subject to orders made by the Securities Commission and can be liable to pay compensation to anyone who suffers loss as a result of the conduct.

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