Regulators monitor new cases of stock-price manipulation

Market regulators are increasing their scrutiny of listed firms found to have taken investment positions in other companies for possible share manipulation.

Executives at the Stock Exchange of Thailand say they are monitoring a number of cases in which listed companies had invested in other stocks.

In addition, there have been cases in which major shareholders of the investing firm also held positions in the target stock, raising questions of conflicts of interest and share manipulation.

Supakit Jirapraditkul, a senior vice-president of the SET, said the exchange was concerned about the practice, as it raised questions among investors about the business policies of the investing company, particularly if its major shareholder invested privately as well.

''It certainly looks like a conflict of interest. Some may think that the major shareholders are using the company they own to support their investments in another firm,'' he said.

In the securities field, the practice is called front-running, where a broker executes an order on its own behalf before processing trades on behalf of the client. The unethical practice essentially aims to boost a company's own profits by churning orders for clients.

A listed company could be seen as doing the same. In a common example, a company's major shareholder or executive may hold stock X. By ordering the company to also purchase shares of company X, they could hope to benefit their own personal shareholdings by pushing up the price.

Mr Supakit said listed companies typically defended their investment practices in so-called speculative stocks as part of their portfolio management strategies.

Queries to the major shareholders about their own intentions often resulted in vague answers that they were seeking future capital gains.

Yet Mr Supakit said that in many cases, such stocks showed unusual trading patterns and price volatility despite no change in their fundamentals, possibly indicating manipulation.

''Yes, we will look at their share trading as well and look deeply whether it has any unusual trading pattern that will lead to any share manipulation or not,'' he said.

Mr Supakit said that if unusual price or volume movements was detected in any stock, the SET could place trading restrictions on net settlement or margin trades to curb volatility.

''We can also help investors by asking the company to disclose more information on their investments and shareholding structures. At the end of the day, investors need to make their own decisions on whether to invest in a company.''

Investors should also raise inquiries with company management on their investment strategy, particularly for stocks unrelated to the firm's core operations and which could show losses in the future.

Mr Supakit declined to comment on market reports that regulators were monitoring trading patterns of Rich Asia Steel and Siam2You, two listed companies whose stock prices have swung sharply in recent trading sessions.

He said the exchange could not disclose any details about the share trading investigation in any company. In fact, the investigation process is time-consuming and when the SET finds irregularities, it has to pass all information to the Securities and Exchange Commission (SEC) for a further probe.

''If outsiders can see some irregularities with some share trading, don't you think that the market regulators won't detect it?,'' he asked rhetorically.

In some cases, the SET can find some unusual trading patterns while investors didn't feel notice that until the SEC announced to charge those who are involved in the share manipulation or insider trading.

source:www.bangkokpost.com