Market manipulation by Kok Ding Cheng a warning ‘for online share brokerage accounts’

An investor faced an FMA investigation after making five small orders for NZX-listed shares. Photo / NZME

Some small trades online have led to a big fine for an investor.

Kok Ding Cheng has been told to pay $198,000 after the Financial Markets Authority (FMA) took him to court over his behaviour with an online share trading account.

Cheng made five small orders for NZX-listed shares in medicinal cannabis company Rua Bioscience over 10 days in late 2020.

The FMA said he had a broking account with ASB Securities. It said the High Court at Auckland assessed five orders ranging from $59 to $540.

The Financial Markets Conduct Act prohibits trade-based market manipulation.

“The court found that Cheng deliberately placed the orders for the purpose of increasing the price and/or demand for Rua shares,” the FMA said in a statement.

“Cheng did not file a statement of defence during the proceeding, and so the proceeding progressed by way of formal proof hearing.”

FMA head of enforcement Margot Gatland said Cheng’s orders lacked a genuine commercial purpose.

Instead, they were made to boost the price or demand for Rua shares when Cheng held a material shareholding in the company.

“This case and the judge’s ruling are important reminders that trade-based market manipulation can occur when trading through online share brokerage accounts.

“Market manipulation undermines confidence in financial markets because it means investors can’t trust prices or market activity to be genuine.”

Gatland said the FMA took cases of market manipulation seriously.

“We considered Mr Cheng’s conduct warranted a firm response to deter market manipulation.

“Investors should be careful to understand their obligations when trading online, as trading listed shares for disingenuous reasons can result in liability.”