Warning about market manipulation for online stock brokerage accounts by Kok Ding Cheng

An individual’s involvement in some minor online trades resulted in significant penalties. Kok Ding Cheng was ordered to pay $198,000 following legal action taken against him by the Financial Markets Authority (FMA) concerning his activities with an online share trading platform. Cheng engaged in five small transactions for NZX-listed shares in the medicinal cannabis company Rua Bioscience over a span of 10 days towards the end of 2020.

The FMA revealed that Cheng operated through a broking account with ASB Securities, with the High Court in Auckland examining five transactions ranging from $59 to $540. These activities violated the Financial Markets Conduct Act, which prohibits trade-based market manipulation, a serious offense in the financial sector.

According to the FMA, Cheng’s actions were deliberate and aimed at inflating the price and demand for Rua Bioscience shares. Despite not submitting a statement of defense during the legal proceedings, the court determined that Cheng’s behavior was intended to manipulate the market.

Margot Gatland, head of enforcement at the FMA, emphasized that Cheng’s orders did not serve any genuine commercial purpose but rather were designed to artificially boost the value and interest in Rua shares, given Cheng’s substantial holdings in the company. This case serves as a significant warning about the consequences of engaging in trade-based market manipulation through online trading accounts, as such practices erode trust in financial markets by distorting prices and market activities.

Gatland reiterated the FMA’s commitment to addressing instances of market manipulation with the seriousness they deserve. The regulatory body aimed for a robust response in Cheng’s case to deter similar behavior in the future and to remind investors of their obligations when participating in online trading activities. Trading in listed securities for dubious reasons can expose individuals to legal liabilities, highlighting the importance of transparency and integrity in financial dealings.