Punish market manipulators to prevent stock market frauds

Private equity investor Ye Fei recently said that nearly 20 listed companies, securities firms and fund companies engaged in market value management were manipulating stock prices.

After Ye's whistle-blowing, prices of some stocks fell sharply on Monday, with investors abandoning small-market value companies in favor of white horse and blue chip shares.

The market regulator has decided to investigate the alleged manipulation of stock prices. Ye has revealed how in the securities industry, listed companies, traders, intermediaries and proxy holders have established a nexus with the industry players to manipulate stock prices and damage the interests of smaller investors.

Market value management is an accepted practice in the securities market. However, that is essentially to put the interests of shareholders first and generate greater returns for shareholders. Therefore, relevant stakeholders are motivated to stabilize or push up stock prices, even by exaggerating performance, mergers and acquisitions, business restructuring or other means.

Such distorted market value management is usually an underground operation and, if not reported by the relevant stakeholders, difficult for outsiders to detect.

In fact, stock price manipulation under so-called value management became popular in 2015 when the circuit breaker was activated in the domestic A-share market.

Because the regulators did not take stringent regulatory measures against the practice, it seriously undermined the interests of small and medium shareholders. Ye's revelations show listed companies and other relevant parties manipulate the market by exploiting the loopholes in institutional arrangements.

These loopholes should be plugged as soon as possible. In addition, the regulators should use the big data system to supervise trading accounts based on IP addresses and other information.

However, many institutions have servers on cloud computing platforms or in different regions, making it increasingly difficult for the regulators to supervise.

To prevent listed companies, securities firms and fund companies from manipulating the market in the name of market value management, the authorities should strictly punish the culprits.

At present, the cost for indulging in such illegal acts is low. So the punishment for listed companies and major shareholders manipulating the market should be increased.

21st Century Business Herald