Analysis
Sometimes you just want a stock to be above a certain price. Maybe it’s to secure a performance bonus, avoid being delisted, prevent margin loans that would trigger or perhaps you are trying to disrupt an acquisition. While the motivations may vary, manipulating the stock to make that happen is market manipulation.
In this month’s analysis, we’ll cover a few examples of illegal price support, starting with a simple case from Canada and then diving into a more complex one from South Korea.
Key Takeaways
- While there are forms of legal price support, others cross the line into manipulation when they mislead investors or distort market activity.
- Practices like uptick trading, bid support and high closing may seem benign on their own but can collectively distort market perception.
- From Canada to South Korea, recent cases show how price manipulation can influence acquisitions, investor trust and market outcomes.
Legal vs. Illegal Price Support
One example of a legal action to maintain share prices is when underwriters place buy orders during IPOs to ensure a smooth market debut. This activity is explicitly permitted under the U.S. Securities and Exchange Commission’s (SEC) Regulation M, in which buy orders are disclosed, and the activity is transparent. Governments also sometimes intervene to stabilize national markets, particularly in bonds and currencies.
But when the goal is to mislead, and the actions are not transparent, we’re looking at market manipulation.
One example of a legal action to maintain share prices is when underwriters place buy orders during IPOs to ensure a smooth market debut.
Window Dressing: A Nuanced Practice
One of the more intricate forms of manipulation is “window dressing” where portfolio managers try to make their portfolios look better at the end of a reporting period. This can be done legally; for example, dumping poor performers, or illegally; for example, inflating the closing price on the reporting day.
This can be done legally; for example, dumping poor performers, or illegally; for example, inflating the closing price on the reporting day.
A Canadian Case Study: Illegal Price Support and the Alberta Securities Commission (ASC)
Let’s look at a case from the ASC, which recently reached a partial settlement. I chose this case because it focuses specifically on price support as a form of market manipulation. The ASC also identified four types of activity: “Uptick and downtick trading,” “bid support,” “high closing,” and “wash trading.” These four types of activity are commonly seen in examples of illegal price support, though the terminology may not be globally standardized.
Understanding the Tactics: Uptick Trading, Bid Support and More
Uptick and downtick trading was defined as “placing bids for the purpose of moving the share price” and “timing their trading activity to coincide with news releases […] which purported to justify the increase in the share price.” While the ASC didn’t elaborate, in other jurisdictions, this generally implies a trader who is purposely trading to impact the price by timing their trades to push the prevailing price up a tick.
For example, an average trader might trade 100 times but only shift the price a few ticks, as their activity typically doesn’t breach the prevailing price level. Their price impact is low; their goal is to secure the best price per share. In contrast, a manipulator executing the same number of trades could move the price significantly more by timing their orders. Their goal is to maximize price movement using the fewest shares possible.
In contrast, a manipulator executing the same number of trades could move the price significantly more by timing their orders. Their goal is to maximize price movement using the fewest shares possible.
Bid support was defined as “coordinated bids [...] at staggered prices at or below the prevailing bid price in the market” that are “intentionally placed” to “give the artificial appearance of a high level of market activity […] and create an artificial floor price […] when there was increased selling in the market.” This created a perception of both demand and an “artificial floor.”
High closing, also known as marking the close or painting the tape, was demonstrated by the regular upticking of the stock at the close. The closing price is a particularly important metric to influence, as it is often the only historical price an investor will look at.
Wash trading was also observed. While the details of how it was used weren’t specified, this tactic is often used in two ways. Firstly, to generate fictitious volume which gives a false sense of demand. Secondly, trading with oneself in order to set a specific price.
Individually, each action might be explainable. However, it's the “multiple, coordinated bids,” paired with the pattern of activities that were designed to “contribute to a false or misleading appearance of trading activity […] or an artificial price.” This approach is typical in many similar cases, where price support emerges as a pattern of behavior over time and forms part of a broader story.
A South Korean Case Study: Kakao, SM Entertainment and the K-Pop Power Play
For broader stories, few are more compelling than the South Korean case involving the founder of Kakao, the parent company of the popular messaging platform KakaoTalk, and SM Entertainment, the company behind the global K-pop phenomenon and many of its most popular groups. Kakao had accumulated a large position in SM with the intention of acquiring the company. Potentially derailing their plans, HYBE, another K-pop entertainment company, made a public offer for SM at 120,000 won per share.
In response, through what prosecutors are calling illegal means, Kakao executives used affiliates to trade SM 553 times, ultimately investing $173 million USD. The indictment notes several times that the goal of these trades was to keep the stock above the 120,000 won threshold. Over time, this undermined HYBE’s offer and eventually blocked the deal, allowing Kakao to acquire SM without further disruption.
The trial is still ongoing and receiving intense media coverage in Korea. We’ll learn more as it progresses, but the indictment already shows how high the stakes can be, and how market manipulation can be used as a tool in broader schemes.
The indictment already shows how high the stakes can be, and how market manipulation can be used as a tool in broader schemes.
June 2025 Capital Markets Regulatory Updates
20 June 2025: The European Securities and Markets Authority (ESMA) launched its first selection procedure for a Consolidated Tape Provider (CTP) for shares and ETFs to improve market transparency and efficiency.
19 June 2025: The Korea Exchange (KRX) is establishing a Rapid Investigation Department to enhance market surveillance and swiftly address abnormal trading.
13 June 2025: The Taiwanese Financial Supervisory Commission (FSC) previewed a draft bill, proposing steep penalties for crypto-related crimes, while also introducing a licensing regime and promoting industry self-regulation to enhance trust and oversight in the virtual assets sector.
10 June 2025: The U.K. Financial Conduct Authority (FCA) finalized rules for its new platform, the Private Intermittent Securities and Capital Exchange System (PISCES), which will enable secondary trading of private company shares among institutional and sophisticated investors.
6 June 2025: The Monetary Authority of Singapore (MAS) clarified that Digital Token Service Providers serving only overseas clients must obtain a license, underscoring MAS’ strict stance on mitigating money laundering risks in cross-border crypto activities.
6 June 2025: The FCA announced its proposal to lift the ban on crypto exchange traded notes (cETNs) for retail investors, aiming to enhance market competitiveness while maintaining safeguards through financial promotion rules and FCA-approved trading venues.
5 June 2025: The House Financial Services Committee held a hearing to advance the CLARITY Act—a bipartisan bill aimed at establishing a comprehensive regulatory framework for digital assets to promote innovation, protect consumers and restore U.S. leadership in financial technology.
3 June 2025: The FCA published an updated Enforcement Guide, retaining the ‘exceptional circumstances’ test for announcing investigations and introducing new transparency measures.
29 May 2025: The Securities and Exchange Board of India (SEBI) introduced new rules for the equity futures and options market to enhance transparency, curb excessive speculation and improve market stability by tightening position limits and linking them to cash market volumes and stock liquidity.
Latest Fines and Enforcement Actions
- ASC reached a settlement with an individual who admitted to participating in a market manipulation scheme involving shares through uptick trading and bid support, creating a misleading appearance of trading activity and artificial pricing.
The Sindh Special Court issued Pakistan’s first-ever insider trading conviction, finding the former AVP at a private bank guilty of using confidential bank information for personal gain, resulting in a financial penalty of approximately $31,000 USD.
The Australian Securities and Investments Commission (ASIC) secured guilty pleas for four individuals who participated in a coordinated pump-and-dump scheme targeting Australian penny stocks via Telegram groups.
The Canadian Investment Regulatory Organization (CIRO) fined an individual $21,000 for executing trades outside a recognized marketplace.
The FCA led a global crackdown on unlawful finfluencers, making three arrests, initiating criminal proceedings against three individuals, and issuing 50 warning alerts that triggered over 650 takedown requests across social media and websites.
The U.S. Commodity Futures Trading Commission (CFTC) secured a final judgment against multiple individuals and entities involved in a fraudulent digital asset scheme, ordering over $25 million in penalties and restitution, and permanently banning them from participating in CFTC-regulated markets.
CIRO sanctioned Canaccord Genuity Corp. with a $600,000 fine, $2.2 million in disgorgement and $50,000 in costs for failing to act as a gatekeeper in U.S. over-the-counter low-priced securities trading.
SEBI barred 59 individuals and entities from the securities markets for up to five years and ordered them to disgorge approximately $6.7 million USD for orchestrating a pump-and-dump scheme using misleading YouTube videos.
SEBI imposed a trading ban on IndusInd Bank’s former CEO and four senior executives for allegedly engaging in insider trading based on undisclosed accounting discrepancies in the bank’s derivatives portfolio.
The FCA secured insider dealing and money laundering convictions against two individuals who used confidential market information obtained through employment to profit from trades executed via third-party accounts.
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