Have you received a hot investment tip? Caution – don’t become a victim of market manipulation!
“Pump and Dump” is one of the most frequent types of stock market manipulations. For example a company will be founded for the sole purpose of increasing its share price artificially by using false and misleading information. Otherwise large quantities of a security are purchased for the lowest possible price in order to push up its price and turnover. Once this has happened, the players involved sell their shareholdings at a high profit. The resulting losses are then borne by retail investors, who are left sitting on shares that are not worth anything. You can find out in this article about whether share tips are serious or not.
How are stock tips passed on?
Agents reach potential investors from all age groups and professional groups using social media channels, cold calling, spam e-mails and recommendations in market newsletters.
You should pay particular attention to whether stock tips are reliable or not.
- Penny stocks: shares of generally small and unknown firms with a share price of only a few cents. They are highly speculative and are particularly vulnerable to manipulation due to strong price fluctuations and are often bought as apparent bargains.
- Multilateral trading facility (MTF): Financial instruments are traded on such a facility that are neither required to observe legal conditions for authorisation not transparency requirements. Market manipulation is also prohibited on such trading facilities, but in the overwhelming majority of cases there is no obligation to produce a capital market prospectus, but there is only very little information if any at all for investors, and therefore you should exercise particular care.
- Illiquid stocks: Stocks that are only traded very infrequently or in very low quantities. Since the volume of shares is small and trading activity is low, it only requires a few new investors to drive the price up.
How can you protect yourself and recognise whether share tips are reliable or not?
- Check securities in particular detail that you are recommended to buy in a particularly provocative manner. You should always ask yourself why a stranger is motivated to give you unsolicited recommendations.
- Collect information about the company in question. Is the company actually actively operative? What is the history of the company? Where is the company’s registered address? Does the company’s website give a serious impression?
- Find out where the stock is traded!
- Don’t rely on a single source of information. You can often find worried investors through online forums.
- Remember: a high return is always associated with a very high risk. You should therefore be particularly cautious where promises are made about high rates of return.
- Check whether the FMA has already advised exercising caution regarding specific recommendations to buy shares!
Have you already fallen victim to market manipulation? What should you do?
You should make a report to the police or the Public Prosecutor’s Office (Staatsanwaltschaft) without delay. In addition, you may also submit factual information to the FMA. Market manipulation is either punished by means of administrative penal proceedings or criminal proceedings in front of a court of law.
Cold Calling:Marketing calls made without prior approval having been granted by the recipient are prohibited by law, and may be reported to the telecommunications regulator.
Trading segments on the stock exchange:
Regulated market:in Austria official trading is the form of authorisation with the strictest conditions for authorisation and publicity regulations.
MTF (Multilateral Trading Facility):neither subject to legally regulated conditions for authorisation nor transparency obligations.
A to Z of Finance
- You can find important basic information on our website: A to Z of Finance – Spotting Financial Fraudsters