NCJ Number
195058
Journal
Journal of Financial Crime Volume: 9 Issue: 2 Dated: November 2001 Pages: 117-133
Date Published
November 2001
Length
17 pages
Annotation
This article presents an overview of financial markets manipulative practices, the effects of emerging technologies on market manipulations, and a discussion of United States securities laws designed to combat market manipulation.
Abstract
The authors discuss the effects of globalization of financial markets and emerging technology on traditional securities market manipulations and on enforcement activities designed to curtail such activities. A discussion of the definition of market manipulation along with an extensive presentation of United States legal standards for market manipulations including provisions of the Securities Exchange Act of 1934 and the rules promulgating under the Exchange Act is provided. An extended discussion of the "catch-all" anti-fraud provision, Exchange Act section 10(b) and Rule 10b-5 are presented. The authors further review the effects of Exchange Act section 9 and provide a thorough listing of other Exchange Act rules that contain anti-fraud or anti-market manipulation provisions. Four major market manipulation schemes are identified and discussed. Those manipulative schemes are: the reduction of the publicly available floating supply of a security, the public dissemination of false or misleading positive information regarding the security’s issuer in press releases or through shareholder communications, the use of sham transactions such as "wash sales" or "matched orders" to create an increased appearance of market demand, and the insertion, by the manipulator or caused by the manipulator, of successively higher bids at arbitrarily set prices. The schemes are then discussed in the context of the use of the Internet or e-mail as an aid to the manipulation. In conclusion, the authors suggest that international cooperation to control market manipulation should focus on each nation’s striving to 1) adhere to uniform system of transactional practice; 2) aggressively prosecute manipulative activity conducted within its borders; and 3) allow both foreign and domestic parties equal access to that nation’s courts to seek redress for market manipulation injuries. 66 notes