Private markets in ASIC sights after odd share price movements identified

ASIC will more closely examine price movements and trades in private markets in the future, after a review identified suspicious trades in ASX-­listed shares post the Covid-19 pandemic.

ASIC’s review found companies experienced a rise in their share prices before price-sensitive announcements were made to the market. Picture: Gaye Gerard

The corporate regulator says it will scrutinise price movements and trades in private markets and products in coming years, after a review identified a significant number of suspicious trades in ASX-­listed shares around the Covid-19 pandemic and in late-2023.

In a report published on Wednesday, the Australian Securities and Investments Commission identified two key periods of “anomalous” trading for Australia’s financial markets, highlighted by the corporate regulator as concerning windows where a number of “suspicious” trades were made by investors.

ASIC found although Australia had among the cleanest financial markets in the world, there were several areas of concern.

In the report, ASIC said a review of sharemarket trading found several companies seeing a run up in their share prices and trading before significant price-sensitive announcements were made to the market.

ASIC said its research found much of this market activity saw the participation of retail investors, with a significant amount of social media commentary about investing contributing to an increase in market misconduct and insider trading. The regulator said it was concerned by trades from reactivated trading accounts, or new accounts making significant trades shortly after their creation.

ASIC chair Joe Longo. Picture: Aaron Francis

ASIC chair Joe Longo said the regulator’s report showed the impact of “following the data” on trades and financial markets. “The whole question around how clean Australian markets are, everyone should be interested in that,” he said.

“Clean financial markets are essential for the financial wellbeing of Australians and fundamental to an efficient economy.”

Mr Longo said clean markets enabled businesses to raise capital and investors to hold confidence in markets. “Protecting and enhancing the integrity of Australia’s equity markets continues to be a priority focus for ASIC,” he said.

Mr Longo said ASIC would look at scrutinising trading in private markets and products “as our financial landscape evolves”.

ASIC will also establish a dedicated criminal investigations team “to swiftly progress insider trading investigations”, with the regulator noting it would look to increase its referrals to the Commonwealth Director of Public Prosecutions.

The corporate regulator, which oversees financial markets, has copped criticism in recent reviews for its enforcement activity. A Senate inquiry called for ASIC to be split between a companies regulator and a separate financial conduct authority. ASIC has called for more resourcing for the CDPP to better prosecute criminal referrals.

On Tuesday, ASIC secured criminal charges against four people on allegations they ran a “pump and dump” Telegram chat group aimed at manipulating the share prices of ASX-listed companies. ASIC said it had six insider trading criminal prosecutions before the courts.