2.8.1. Market Manipulation
An individual or firm who uses deceptive techniques in an effort to change the price of a security is engaging in market manipulation. In recent years, both the SEC and FINRA have stepped up their efforts to police market manipulation. While market manipulation can take many forms, there are some practices that FINRA has expressly declared to be market manipulation:
• Executing purchases of a security at increasingly higher prices for the purpose of making it appear that trading activity is driving up the price (or at decreasing prices to make it look like trading activity is driving the price down)
• Effecting the transaction of any security that involves no change in beneficial ownership
• Simultaneously buying and selling a security at the same price in order to make it look like there’s an active market for the security
• Engaging in excessive transactions
• Participating in a joint account without first informing FINRA
• Soliciting orders to unfairly influence the market price of a security
• Making any false or misleading statement concerning a security with the intent to influence its market price
» A common form of this is a pump and dump scheme, which involves “pumping” up the price of a stock through false or mis