Rapish Pokhrel
Advocate
Market Manipulation and Insider trading are the terms commonly used in Stock Market, both terms make close connection with each other. Market is said to be manipulated when individual or some people in group participate to influence price or volume of securities artificially. The manipulators cause dramatic increase or decrease of price of securities for individual or groups’ benefit. They creates hype in the market by spreading false information to influence people to purchase or sell particular stock mentioning some reasons like getting information access of higher dividend payout, merger & acquisition, corporate fraud etc. They may influence you to borrow from bank by pledging property and purchase particular stock at higher price to make you victim of their conspiracy of securities fraud. On the other hand, insider trading is the transaction based on access to information before it is published officially. The person getting access to information is benefited in this case. Suppose your friend is CEO of reputed company and he or she discloses you the profit figure before the financial statements are published. When you purchase the shares of that company, then the trade becomes inside trade. Both market manipulation and inside trade comes under serious criminal offence.
In USA, the term securities fraud is more commonly used for corporate bodies. Securities fraud commonly known as investment fraud is said to be committed by misrepresentation of information to investors in making decisions. This involves fraud profit making at the expense of others. The participants of securities fraud may be stockbroker, brokerage firm, investment bank, any corporations or any individual participating through insider trading. All these crimes represent serious white-collar crime.
When you involve in conspiracy to commit securities fraud in USA, you may be sentenced up to maximum of 25 years in prison plus fine. Committing or attempt to commit market manipulation will be sentenced up to maximum of 10 years in prison plus fine of $1,000,000 or triple amount of benefit from manipulation whichever is higher. Federal district court judges imposes sentences based on U.S. sentencing guidelines and statutes. In USA, the market manipulation regulations are securities act of 1933, Exchange act of 1934, Commodity exchange act of 1936, and title 18 of US code. Fine and penalties also differ as per these regulations.
When talking to Nepalese scenario, market manipulation and inside trade related activities are not seriously addressed by current provisions. There is no any provision for punishment under National Penal Code, 2017. The Securities Act, 2007 has some provisions related to misleading statements, fraudulent transactions, transaction of securities by fraud or misrepresentation and destroy or concealment of documents, statements and records. The maximum imprisonment under Securities Act, 2007 is just for two years. Current provisions cover narrow scope only. Commodities Act- 2017 has provision for maximum imprisonment for five years and penalties for One Million Rupees for agricultural and metal related transaction for commitment of various offence. Commodities act has not been implemented yet since not any commodity exchange has been established till date. However, the various areas of investment banking and securities transaction will have higher possibility to flourish in future. Investment bankers will expand its services in broad categories. There will be registered investment advisers, certified financial planners, more organized stock brokers, market makers and market dealers. Nepalese securities and investment fraud lawyer will litigate for misrepresentation or fraud, dispute for unsuitable investment portfolios, failure to supervise portfolio, overconcentration in portfolio, broker negligence, excessive trading, breach of fiduciary duties, churning or frequent buying or selling for high brokerage fee etc. What needs to do is amendment in national penal code-2017,securities act-2007 and commodities act-2017 to make these acts accountable.