Pump & Dump Schemes - Tackling the Proliferation

1. Tackling the Proliferation of Pump & Dump Schemes Market manipulation schemes referred to as ‘pump and dump’ are not new. In fact, concerns were being raised in the US Senate as early as the 1930s, but what is new are some of the ways in which these fraudulent schemes are now being run. https://www.shieldfc.com/

2. What is a ‘Pump & Dump’ scheme? Pump and dump’ (also referred to as ‘ramp and dump’) schemes essentially have two parts. Firstly, the perpetrators orchestrate a campaign to inflate (‘pump’) the price of a stock with false or misleading information. How big is the issue? Pump and dump schemes have proliferated in the day trading boom we’ve witnessed during the COVID-19 pandemic. In fact, in September 2020, the Hong Kong Securities and Futures Commission (SFC). But there’s another factor that is concerning regulators and that is that these schemes are increasingly being operated via social media platforms – Facebook, Instagram, WeChat, Whatsapp, Telegram – and even online dating platforms.

3. What actions should firms be taking? Firstly, firms should be actively identifying groups of clients who trade in the same stock, in the same direction, and around the same time. These clients may have opened accounts at a similar time or have the same account contact details. Finally, firms must file Suspicious Activity Reports (SAR) / Suspicious Transactions & Order Reports (STORs) and especially where there is a sudden and unexplained price movement. In a bold move, ASIC is infiltrating chat groups operated on messaging apps to engage directly with – and disrupt – the people involved in pump and dump activity. Talk about taking the fight against market manipulation to the front lines! https://www.shieldfc.com/