Authorities at the Nigerian Stock Exchange (NSE) are proposing a four-level penalty for market manipulation and illegal dealings as part of efforts to tighten loopholes and enhance the price discovery mechanism at the stock market.
The NSE is finalising an amendment to its rules to provide multi-level stiffer sanctions as deterrents to market manipulation and illegal market dealings. A draft of the amendment titled “prohibition of market manipulation and illegal market dealings” showed that the Exchange was seeking to impose more sanctions on market manipulations and illegal dealings.
According to the draft, the Exchange may impose all or any of four penalties when it determines that a contravention has occurred. The Exchange may impose a fine equivalent to three times the amount of profit or gain derived by the dealing member in the alleged manipulation or illegal market dealing, which fine must be paid within 10 business days of imposition.
Also, the dealing member shall be placed on suspension for a period to be determined by the Exchange which shall not be less than 30 calendar days. The Exchange shall also forthwith withdraw the registration of the authorised clerk or clerks involved in the transaction.The Exchange shall also cancel all of the affected trades based on inappropriate market behavior.
The new rules prohibit stockbrokers from directly or indirectly use or knowingly participate in the use of any manipulative, improper, false or deceptive practice of trading in a security listed on the Exchange which practice creates or might create a false or deceptive appearance of the trading activity in connection with; or an artificial price for, that security either for his own account or on behalf of another person.
The rules also prohibit dealing members from placing an order to buy or sell listed securities which, to his or her knowledge will, if executed, have the effect contemplated in paragraph creating false or deceptive market.
The rules describe manipulative, improper, false or deceptive trading practices to include approving or entering an order to buy or sell a security traded on the floor of the Exchange which involves no change in the beneficial ownership of that security.
Manipulative, improper, false and deceptive trading practices also include approving or entering an order to buy or sell a security traded on the floor of the Exchange with the knowledge that an opposite order or orders of substantially the same size at substantially the same time and at substantially the same price, have been or will be entered by or for the same or different persons with the intention of creating a false or deceptive appearance of active trading in connection with; or an artificial market price for, that security.
Also, any stockbroker that approve or enter orders to buy a security traded on the floor of the Exchange at successively higher prices or orders to sell a security listed at successively lower prices for the purpose of unduly or improperly influencing the market price of such security as well as anyone that approve or enter an order at or near the close of the market, the primary purpose of which is to change or maintain the closing price of a security traded on the floor of the Exchange shall be deemed to have engaged in market manipulation.
Source: The Nation
