Market Manipulation
Market manipulation generally refers to deliberate attempts to interfere with the market, usually as a way to reap profits by deceiving investors. Market manipulation undermines public confidence in the stock market and puts other investors at an unfair disadvantage.
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Common Forms of Market Manipulation
Market manipulation occurs when individuals or companies:
- distort prices or trades to create a false demand for a security;
- make stock trades based on inside information that is not publicly available (insider trading);
- improperly limit the number of publicly available shares in a stock; or
- spread false or misleading information about a company (often through corporate disclosures).
Laws Against Market Manipulation
Market manipulation is illegal in the United States under both securities and antitrust laws.
Securities Laws
Securities laws and related SEC rules broadly prohibit fraud in the purchase and sale of securities, and the Securities Exchange Act of 1934, Section 9, specifically makes it unlawful to manipulate security prices.
Antitrust Laws
Antitrust Laws such as the Sherman Act and the Commodity Exchange Act.
Violations of these laws can result in government investigations & disciplinary actions, as well as criminal charges and civil lawsuits by investors and others who were harmed.
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