The Australian Securities and Investments Commission (ASIC) has issued a warning to people looking to make a quick buck that participating in ‘pump and dump’ investing campaigns could cost them up to $1 million in fines and land them in prison, or make them a victim.
Commissioner for ASIC, Cathie Armour said the Commission had observed a concerning trend of social media posts being used to coordinate ‘pump and dump’ activity in listed stocks, which could amount to market manipulation in breach of the Corporations Act 2001.
“Pump and dump activity occurs when a person buys shares in a company and starts an organised program to seek to increase (or ‘pump’) the share price,” Ms Armour said.
“They do this by using social media and online forums to create a sense of excitement in a stock or spread false news about the company’s prospects,” she said.
“They then sell (or ‘dump’) their shares and take a profit, and other shareholders suffer as the share price falls.”
Ms Armour said ASIC had seen blatant attempts to pump share prices using posts on social media to announce a target stock, a designated time to buy and a target price or percentage gain to be reached before dumping the shares.
The Commissioner said in some cases, posts on social media may mislead people by suggesting that the activity was legal.
“If an investor decides to buy shares as part of one of these campaigns, they may become the victim,” she said.
“The people behind the campaign may start dumping their shares and taking profits before they reach the target price.”
Ms Armour reminded people that market manipulation was illegal and could attract a fine of over $1 million and up to 15 years’ imprisonment.
She said anyone involved in pump and dump campaigns needed to recognise the potential impact on market integrity and should be aware that ASIC monitored all trading on the ASX equity market through a sophisticated real-time surveillance system.
