Bulletin Boards – Insider Dealing And Market Abuse
Please note: The FCA pays particular attention to information exchanged via financial bulletin boards or chatrooms and has produced a list of possible indications of Insider Trading and / or Market Abuse that it looks out for. Examples of such indications are shown below and clients are therefore advised that should there be grounds to suspect information exchanged or views posted on our bulletin boards may be considered insider dealing or market manipulation, the Beaufort Securities compliance team may be obliged to take action in accordance with FCA guidelines.
Not all the examples outlined below will be relevant to the trading facilities offered by Beaufort Securities. However, these are included for reference.
Possible Signs of Insider Dealing
- A client opens an account and immediately gives an order to conduct a significant transaction or an unusual order in a particular security – especially if the client is insistent that the order is carried out very urgently or must be conducted before a particular time specified by the client.
- A transaction is significantly out of line with the client’s previous investment behavior (e.g. type of security; amount invested; size of order; time held etc).
- A client specifically requests immediate execution of an order regardless of the price.
- Unusual trading in a company’s shares before the announcement of price sensitive information relating to the company.
- An employee’s own account transaction timed just before client transactions and related orders in the same stock.
Possible Signs Of Market Manipulation
1. Information Dissemination
- Whether transactions undertaken by persons are preceded or followed by dissemination of (including false or misleading) information by the same persons, or by persons linked to them.
- Whether transactions are undertaken by persons before or after the same persons, or by persons linked to them, produce or disseminate research or investment recommendations which are erroneous or biased or demonstrably influenced by material interest one or more institutional investors known to be affiliated with the issuer, or a party with a particular interest in the issuer such as a bidder/potential bidder).
2. Price Movements
- The extent to which transactions represent a significant proportion of the daily volume of transactions in the stock concerned, particularly if these activities lead to a significant change in the price of the stock.
- The extent to which transactions are undertaken by persons with a significant buying or selling position in a stock and which lead to significant changes in the price of the stock (or a related derivative).
3. Dealing Patterns
- An unusual concentration of transactions in a particular stock.
- An unusual repetition of a transaction among a small number of clients over a certain period of time.
- An unusual concentration of transactions and/or orders with only one client; or with a limited number of clients (especially if the clients are related to one another).
4. No Change of Ownership
- Transactions which result in no change of beneficial ownership of a stock.
5. Short-term Reversal Price Change
- The extent to which orders or transactions undertaken are concentrated within a short time span in the trading session and lead to a price change which is subsequently reversed.
- The extent to which orders to trade change the representation of the best bid or offer prices in a stock.
6. Setting Reference Prices
- Transactions with no other apparent justification than to increase/decrease the price of, or to increase the volume of trading in a stock. NOTE: Particular attention might be given to orders of this kind which result in the execution of transactions near to a reference point during the trading day – e.g. near the close.
- A client submits orders, which, because of their size in relation to the market in that security, will clearly have a significant impact on the supply of or demand for or the price or value of the security. Particular attention might be given to orders of this kind which result in the execution of transactions near to a reference point during the trading day – e.g. near the close.
- Transactions which appear to be seeking to modify the valuation of a position while not decreasing/increasing the size of that position.
- Transactions which appear to be seeking to maintain the price of the underlying stock below the strike price of a related derivative at expiration date.
- Transactions which appear to have the purpose of increasing the price of a stock during the days preceding the issue of a related derivative/convertible.
- Transactions which appear to have the purpose of maintaining the price of a stock during the days preceding the issue of a related derivative/convertible when the market trend is downward.
- Transactions which appear to be aimed at modifying the price of the underlying stock so that it crosses over the strike price of a related derivative at expiration date.
- Transactions which appear to be seeking to modify the settlement price of a stock when this price is used as a reference/determinant in the calculation of margins requirements.
7. Breach of Rules
- Transactions which appear to be seeking to bypass the trading safeguards of the market (e.g. as regards volume limits; bid/offer spread parameters; etc).