The regulation of market manipulation in australia: a historical comparative perspective


Comparative evaluation and analysis of the market manipulation prohibition



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2.4 Comparative evaluation and analysis of the market manipulation prohibition

Notably, market manipulation was discouraged under the common law in the preceding years prior to the 1960s52 and 189953 in both South Africa and Australia respectively. Nonetheless, market manipulation practices were statutorily prohibited in Australia only in the early 1970s,54 while such practices were outlawed in the late 1980s in South Africa.55 Prior to this, market manipulation was prohibited in South Africa mainly by the common law.56 Moreover, as is the position in Australia,57 the concept of and conduct amounting to market manipulation are not statutorily defined under the Financial Markets Act.58



Furthermore, like the situation in Australia,59 market manipulation practices are statutorily prohibited under the Financial Markets Act.60 However, it is hoped that the Financial Markets Act will be amended to provide an adequate statutory definition of the concept of market manipulation involving all the elements of this offence (including how it is committed) as well as the various types of market manipulation practices,61 to enhance the combating of such practices in South Africa.62 Like the position under the Corporations Act,63 the Financial Markets Act64 also discourages trade-based market manipulation.65 It is important to note that the prohibition of trade-based market manipulation contained in the Financial Markets Act is relatively similar66 to that of the Corporations Act.67 Moreover, the Financial Markets Act prohibits directly or indirectly the making or publication of false, misleading or deceptive statements, promises or forecasts in respect of the listed securities that relate to the past or future performance of a public company.68 However, there is no similar provision in the Corporations Act.69 In this respect, the South African prohibition on disclosure-based market manipulation is commendably broader70 than that of the Corporations Act.71 In addition, unlike the similar prohibition provided in the Corporations Act,72 the prohibition of disclosure-based market manipulation contained in the Financial Markets Act73 does not expressly require the inducement of other persons to buy or sell any affected listed securities before any liability is imposed on the offenders.74 In addition, the concealment or omission of a material fact which gives rise to or which may give rise to the making or publication of a statement, promise or forecast that is false or deceptive is prohibited under the Financial Markets Act.75 The use of the term "material fact" in this prohibition could suggest that fault is required to determine whether the concealed or omitted fact could reasonably give rise to disclosure-based market manipulation in South Africa.76 On the other hand, the Corporations Act77 and the Financial Markets Act's disclosure-based market manipulation prohibition78 may give rise to liability on the part of the accused person only where such person knew or ought reasonably to have known that the statements he made or published were false or misleading. This could further suggest that a similar approach is to be adopted in the enforcement of the disclosure-based market manipulation prohibition in both Australia and South Africa.79 Moreover, in contrast to the position in Australia80 there is no specific provision in the Financial Markets Act which expressly prohibits, directly or indirectly, the dissemination of information about illegal transactions and dishonest conduct in relation to listed securities.81 In addition, market (price) stabilisation mechanisms are allowed in Australia when certain prescribed requirements are met,82 while such mechanisms are generally treated as a defence against some market manipulation offences in South Africa.83 Nonetheless, in contrast to the situation in Australia,84 there are relatively few defences apart from the price-stabilisation defence that are available to any person accused of committing market manipulation offences in South Africa.85



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