Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

SEC Admits that it Rigged Share Prices!

I find it hard to believe this, but the SEC press release
explicitly says that as part of its sting operation, it and the FBI
did actually manipulate the share market – the SEC/FBI
“bought the stock defendants were promoting. Every buy
transaction had a material effect on the stock trading volume of the
companies in question”. Will the SEC/FBI compensate genuine
investors who traded on the basis of the false volumes or prices? The
SEC says “Our office worked closely with the criminal
authorities and provided information and technical assistance
throughout the FBI sting operation in order to minimize harm to
innocent investors.” But minimize is not the same as prevent.

Another puzzling thing in the press release is that after saying
that “In fact, there was no hedge fund”, it goes on to say
that “the hedge fund bought the stock”. Perhaps, it was a
drafting error in the press release.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: