ISSN: 1391 - 0531
Sunday April 13, 2008
Vol. 42 - No 46
Financial Times  

SEC warns ' price-pushing ' brokers

The regulator is pursuing stockbrokers who are trying to push prices of certain illiquid shares and has warned all stockbrokers that such an offence will be penalised under the Securities and Exchange Commission (SEC) Act.

"Through the surveillance systems of the SEC, attempts made by some individual stockbrokers to manipulate the opening price of certain relatively illiquid shares using the pre-open mechanism of the ATS system have been observed," a SEC communiqué said.

It further requested those stockbrokers and staff involved in placing such orders to desist from such activity as they are being closely monitored.

"Any deliberate attempt to interfere with or distort the price discovery which ought to be based on actual and genuine supply demand dynamics of the market place constitutes an offence under the SEC Act," the communiqué said.

A stock market analyst noted that the defining characteristic of these shares that are being manipulated are that they have relatively low free float. "Also in most of these shares, the controlling family or the individual holds a massive stake. In absolute terms the shares price is low and the number of shares in the free float is relatively low," he said.

He said that in stocks such as John Keells Holdings, Dialog Telecom and Commercial Bank, price pushing is not possible, because of their fundamentals and the large amount of shares in the float.

"The fundamentals of the companies' whose illiquid shares have been pushed up have not merited the price increases seen in them," he added.


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