THE REGULATION OF MARKET MANIPULATION IN AUSTRALIA: A HISTORICAL COMPARATIVE PERSPECTIVE

Notably, in Australia, market abuse practices like market manipulation and other market misconduct practices are expressly prohibited under the Corporations Act as amended by the Financial Services Reform Act. In the light of this, and for the purposes of this article, a brief historical analysis of the market manipulation prohibition will be presented first. Secondly, the available penalties and remedies for market manipulation are discussed. Thereafter, possible recommendations and significant Australian anti-market abuse enforcement approaches that may be utilised in South Africa are briefly stated. Lastly, concluding remarks are provided.


Introduction
Notably, in Australia, market abuse practices 1 like market manipulation 2 and other market misconduct practices 3 are expressly prohibited under the Corporations Act 4 as amended by the Financial Services Reform Act. 5 In the light of this, and for the purposes of this article, a brief historical analysis of the market manipulation prohibition will be undertaken first.Secondly, the available penalties and remedies for * Howard Chitimira.LLB, LLM (UFH), LLD (NMMU).Senior Lecturer, Faculty of Law, North-West University.E-mail: Howard.Chitimira@nwu.ac.za.This article was influenced in part by Chitimira's doctoral thesis entitled A Comparative Analysis of the Enforcement of Market Abuse Provisions 354-420.
1 For the purposes of this article, such practices include insider trading (which is the unlawful use of price-sensitive non-public inside information, to conclude transactions in securities to which that information relates by insiders or other persons to the detriment of innocent and other unwitting persons  In this article, market manipulation is defined as a practice that interferes or attempts to interfere with the free and fair operation of the financial markets by creating an artificial, false or misleading appearance with respect to the price of, or market for, a security, commodity or financial instrument.For the purposes of this article, such practices include the misuse of material information; the dissemination of false or misleading information; a practice which abnormally or artificially affects, or is likely to affect, the formation of prices or volumes of financial instruments or securities; dark pools and wash trades.For the purposes of this article, such practices include false trading and market rigging, quote stuffing, front running, insider trading, and a failure to continuously disclose price-sensitive information that relates to the relevant financial instruments.

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The Corporations Act 50 of 2001 (Cth) as amended, hereinafter referred to as the Corporations Act.
The Financial Services Reform Act 122 of 2001 (Cth) as amended, hereinafter referred to as the Financial Services Reform Act.Generally see the Corporations Act, s 1041A for market manipulation; s 1041B for false trading and market rigging, including the creation of a false or misleading appearance of active trading; s 1041C for false trading and market rigging, including artificially maintaining a trading price; s 1041D for the dissemination of information about illegal transactions; s 1041E for false or misleading statements; s 1041F for inducing other persons to a deal; s 1041G for dishonest conduct and s 1041H for misleading or deceptive conduct (civil liability only).For a detailed analysis of these provisions, see the discussion that will ensue later under the sub-headings in para 2 and also see Part 7.10 of the Corporations Act.See further Huang 2009 C & SLJ 8-22.
See the codification of common law as undertaken in the Australian states of Queensland in 1899, Western Australia in 1902 and Tasmania in 1924.Accordingly, in Victoria and South Australia states, the common law crime principles discouraging inter alia market abuse practices are expressly retained under s 321F(2) of the Crimes Act 6231 of 1958 (Vic) and s 133(2) of the Criminal Law Consolidation Act 2252 of 1935 (SA).In relation to this, it is important to note that market manipulation was historically outlawed as a crime of conspiracy to defraud or deprive other persons of their securities or financial instruments which they own and which they are or might be entitled to own in Australia, the United Kingdom and the USA.Furthermore, in some instances the conspiracies to defraud through market manipulation were treated as a crime only if two or more individuals acted together to commit market manipulation under common law.See R v Aspinall (1876) 1 QBD 730; R v Aspinall (1876) 2 QBD 48 (Court of Appeal); R v De Berenger (1814) 3 M&S 67; Wai Yu-Tsang v R [1992] 1 AC 269; Scott v Metropolitan Police Commissioner [1975] AC 819; Cooke [1986] AC 909.See further Loke 2007 http://goo.gl/YVBTGQ4-7.
activities that interfere with the natural forces of supply and demand of a particular security or financial product in Australia. 13

The prohibition of market manipulation prior to 2001 14
Market manipulation was initially prohibited by the Securities Industry Act 1970. 15This Act inter alia outlawed the creation of a false or misleading appearance of active trading with respect to listed securities or the market for and price of any securities. 16similar prohibition was also retained in the statutes which were later enacted. 17The Corporations Law 1990 further prohibited market manipulation practices such as the making or publication of false or misleading statements, 18 the manipulation of the futures contracts market and the artificial maintenance of securities trading prices in the relevant Australian 19 markets. 20The Corporations Law 1990 also prohibited any misleading or deceptive conduct on the part of all the relevant persons, especially the officers or employees of companies. 21 mainly prohibited stock (including securities) market manipulation and market rigging 22 and its prohibition required proof of mens rea before any liability could be imputed to the accused persons.Consequently, the enforcement authorities struggled to obtain settlements and convictions in market manipulation cases. 23

The prohibition of market manipulation under the Corporations Act
Market manipulation and other related market misconduct activities are currently prohibited in the Corporations Act. 24In addition, the scope of application of the market manipulation prohibition is now broadly extended to other related activities such as market rigging, front running, 25 insider trading and a failure to continuously disclose price-sensitive information that relates to the relevant financial instruments. 26More importantly, among the major amendments made to the Corporations Act by the Financial Services Reform Act is the removal, on the part of the prosecution, of the explicit requirement of proving the existence of intent from the wording of the market manipulation and other related provisions before imputing any liability to the accused offenders. 27  Intention is the fault element for the physical element for doing or omitting to do an act as stated in that subsection and recklessness is the fault element for having or likely to have the effect of creating or causing the creation of a false or misleading appearance, as stated in that subsection.-4, 7-12, 16-17, 4-7.which have or are likely to have the effect of creating an artificial price for trading in financial products or maintaining at an artificial level a price for trading in the products listed on a financial market in Australia. 28As stated above, the current market manipulation provisions dispense with the requirement of proving the intention to induce others to sell, buy or subscribe to the affected securities or financial products before imputing any liability on the accused persons. 29Put simply, the key issue now is whether the price of certain financial products is artificial or misleading.Thus, the focus is now on the effect of the market manipulative conduct in relation to the affected financial product rather than on the intention 30 of the trader or the person involved.
In addition, false trading, 31 market rigging 32 and the creation of a false or misleading appearance of active trading in a financial product or with respect to the market for or the price for trading in a financial product are expressly prohibited under the Corporations Act. 33In addition, what may constitute a false or misleading appearance of active trading is outlined in the so-called deeming provisions concerning wash sales 34 and matched orders. 35Likewise, the carrying out of fictitious transactions, 28 Section 1041A of the Corporations Act.29 Section 1041A of the Corporations Act; compare with ss 997, 1259 of the Corporations Law 1990.30 Sections 5.4(4), 5.2 and 5.6(2) read with s 5.6(1) of the Criminal Code Act.

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This occurs when a person negligently or intentionally employs a scheme, device or artifice which creates or might create and maintain a false or misleading appearance with respect to the market for or price of active trading in any securities or financial instruments on the relevant financial markets.This is usually an unfair and illegal act or practice which is employed by a person or company to manipulate the sale or price of securities or financial instruments inter alia by raising or lowering the price of securities or financial instruments in order to create a false and misleading appearance of active trading in relation to such securities or financial instruments.
Section 1041B(1) of the Corporations Act; also see s 1041B(1)(1A) of the same Act, which outlines the fault elements.
A wash sale occurs where a person or an associate is both the buyer and seller in the same transaction (selling and repurchasing of the same or substantially the same financial product for the purpose of generating activity and increasing its price).S 1041B(2)(a) read with s 1041B(1) of the Corporations Act; s 1041B(3) of the Corporations Act sets out circumstances in which an acquisition or disposal of financial products does not involve a change in beneficial ownership and s 1041B(4) of the Corporations Act enumerates what a transaction of acquisition or disposal of financial products includes.

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A matched order occurs where a person and his associate place an order to buy or sell at the same time, for substantially the same number of securities or financial products at substantially the same price.S 1041B(2)(b) read with s 1041B(1) of the Corporations Act.Also see ss 5.2(2), 5.6(2) of the Criminal Code Act, where other physical elements are outlined which are taken into account by the courts or the prosecuting authorities in determining whether the market manipulation which have the effect of maintaining, fluctuating, inflating or depressing the price for trading in the financial products on the relevant financial markets in Australia is prohibited. 36e dissemination of information about illegal transactions is also prohibited in the Corporations Act. 37In other words, all persons are prohibited from disseminating any statement or information to the effect that the price for trading in a financial product on the relevant markets will rise, fall or be maintained, or is likely to rise, fall or be maintained. 38Similarly, the reckless or intentional 39 making or dissemination of a statement or information that is false or misleading materially and which is likely to induce other persons to deal in financial products or to affect the price of financial products is outlawed in Australia. 40e Corporations Act further prohibits any person from inducing others to unlawfully deal in the relevant financial products. 41Moreover, this provision contains a definition of the term "dishonest". 42This prohibition on "inducing others" is now extended to conduct such as applying to become a standard employer sponsor of a superannuation entity and permitting a person to become a standard employer sponsor of a superannuation entity. 43The Corporations Act prohibits any person, in the course of carrying on a financial services business in Australia, from engaging in dishonest offences were committed by the accused persons in question.See paras 3.115, 15.15In this regard, dishonest means (a) dishonest according to the standards of ordinary people; and (b) known by the person to be dishonest according to the standards of ordinary people.Also see s 1041F(2) read with s 1041G(2) of the Corporations Act.
Section 1041F(3) of the Corporations Act.Accordingly, the contravention s 1041F will lead to civil liability despite the fact that it is not necessarily a civil penalty provision; see further the Supplementary Explanatory Memorandum paragraph 3.116.conduct in relation to a financial product or service. 44Dishonest conduct is defined to mean dishonest according to the standards of ordinary people, including conduct known by any person to be dishonest according to the standards of ordinary people. 45is definition seems to contain both subjective and objective elements which must be proved by the prosecution in determining if the conduct in question will be dishonest as contemplated above. 46reover, conduct in relation to a financial product or service that is misleading or deceptive or likely to mislead or deceive other persons with respect to certain financial products is broadly prohibited. 47However, this prohibition does not apply to misleading or deceptive takeover, compulsory acquisition and fund raising documents or disclosure documents or statements, as defined in the Financial Services Reform Act. 48However, the prohibition on misleading or deceptive conduct may apply: (a) to applying to become a standard employer sponsor of a superannuation entity, (b) to permitting a person to become a standard employer sponsor of a superannuation entity, (c) to a trustee of a superannuation entity's dealing with the beneficiary of that entity as such beneficiary, and (d) to a trustee of a superannuation entity's dealing with a standard employer sponsor. 49her activities that are related to market manipulation such as short selling 50 and market stabilisation are also outlawed in the Corporations Act.Notwithstanding this Section 1041G(1) of the Corporations Act, which is treated as a civil penalty provision but nonetheless its contravention may further results in criminal liability on the part of the offenders.Also see the Revised Explanatory Memorandum para 15.19.Section 1041G(2) of the Corporations Act.

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This criterion was employed in R v Ghosh [1982] 3 WLR 110; R v Ghosh [1982] QB 1053 read with Boggeln v Williams [1978] 1 W LR 873; R v Feely [1973] QB 530; R v Gilks [1972]  Short selling is a practice which involves selling securities or assets such as derivatives by the seller without owning them at the time of the transactions, with the intention of buying them back at a later stage but at a much lower price.S 1020B of the Corporations Act.Also see Chitimira May  2014 MJSS 67-68.general prohibition, short selling and market stabilisation may only be permitted under certain requirements as stipulated in the Corporations Act. 51

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 1960s 52 and 1899 53 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. 55Prior to this, market manipulation was prohibited in South Africa mainly by the common law. 56Moreover, 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. 58rthermore, like the situation in Australia,59 market manipulation practices are statutorily prohibited under the Financial Markets Act. 60However, 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 51 For example, short selling and market-stabilisation may be allowed where they are the subject of a declaration by a market operator (for example a stock exchange) as approved for such short selling or market stabilisation purposes.See Chitimira 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. 62Like the position under the Corporations Act, 63 the Financial Markets Act 64 also discourages trade-based market manipulation. 65It is important to note that the prohibition of trade-based market manipulation contained in the Financial Markets Act is relatively similar 66 to that of the Corporations Act. 67Moreover, 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. 68However, there is no similar provision in the Corporations Act. 69In this respect, the South African prohibition on disclosure-based market manipulation is commendably broader 70 than that of the Corporations Act. 7161 In relations to this, it is submitted that the aforesaid definition should expressly apply to all the types and related market manipulation practices such as high frequency trading (a manipulative practice that involves persons like brokers, issuers and financial analysts who act in a proprietary capacity to employ sophisticated computerised algorithmic decision-making systems in order to obtain advantage from some minute discrepancies in the financial markets stock prices and then quickly trade in such stocks in large quantities to gain profit), front running, naked short selling (which occurs when a seller agrees to short sell a security within a stipulated period without taking prior measures to repurchase it at a later stage) and quote stuffing (a manipulative tactic which involves the prompt entering and withdrawing of large stock orders by any person in order to flood the market with quotes that other persons have to process, thereby causing them to lose their fair competitive advantage in such stocks).See Chitimira May 2014 MJSS 61-62, 64, 67-68.Notably, the same position was also enumerated in s 75 of the Securities Services Act 36 of 2004, hereinafter referred to as the Securities Services Act; clause 84 of the Draft Financial Markets Bill, 2011, hereinafter referred to as the Draft Financial Markets Bill, and clause 82 of the Financial Markets Bill [B12-2012], hereinafter referred to as the Financial Markets Bill, 2012 (I have employed the term "clause" to refer to the provisions of both the Draft Financial Markets Bill and the Financial Markets Bill, 2012.In relation to this and for the purposes of this article, the relevant provisions of the afore-said Bills and the now repealed Securities Services Act will be referred to only where necessary for historical comparative analysis).In addition, unlike the similar prohibition provided in the Corporations Act, 72 the prohibition of disclosure-based market manipulation contained in the Financial Markets Act 73 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. 74In 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. 75The 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. 76On the other hand, the Corporations Act 77 and the Financial Markets Act's disclosure-based market manipulation prohibition 78 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. 79Moreover, in contrast to the position in Australia 80 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. 81In addition, market (price) stabilisation In other words, the fact that the concealed or omitted fact must be a "material fact" and not just merely any fact suggests that fault elements or an objective test will be established and employed by the relevant courts.S 81(1) of the Financial Markets Act.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. 83Nonetheless, 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

Available penalties and remedies
The Corporations Act extends civil penalties, civil remedies 86 and criminal penalties to any person who violates its provisions on market manipulation. 87

Criminal penalties
Any person who engages in market manipulation activities is liable for a criminal offence and penalty. 88The discretion to institute criminal proceedings rests primarily Moreover, the prosecution of market manipulation and other market misconduct offences may be instituted within five years after the commission of the offence in question or at any time as stipulated by the Minister of Justice. 90Any person who engages in manipulation or other market misconduct offences 91 will be liable for a maximum criminal penalty fine of Aus $22, 000 for individuals or Aus $110, 000 for a body corporate, or imprisonment for a period not exceeding five years, or both such fine and imprisonment. 92These penalties were recently increased by the Corporations Amendment (No 1) Act, 93 to a maximum pecuniary fine of Aus $495, 000 or three times the profit gained or loss avoided, whichever is the greater, 94 or ten years imprisonment, 95 or both such fine and imprisonment, for individuals.The maximum criminal penalties for a body corporate were increased to a fine of Aus $4, 950, 000, or three times the profit made or loss avoided, or 10% of the body corporate's annual turnover during the relevant period in which the offence was committed, whichever is greater. 96This clearly suggests that market manipulation and other related market misconduct offences are all treated as criminal offences, as they carry the same penalty. 97In relation to this, the ASIC may further bring such criminal proceedings even after civil penalty proceedings for the same conduct have been instituted. 98wever, where a person has been convicted of a criminal offence for the same conduct, no civil penalty action will be additionally instituted against such person.In the light of this it is submitted that the Financial Markets Act should be amended to enact a specific provision which stipulates that an individual who is convicted of an offence relating to insider trading or market manipulation will be liable to a fine of up to R85 million, or to imprisonment for a period of not more than 25 years, or to both such a fine and imprisonment. 107 It is further submitted that the Financial Markets Act should be amended to enact a specific provision which stipulates that a juristic person or company that is convicted of an offence relating to insider trading or market manipulation will be liable to a maximum fine of R750 million, or to six times the profit made or loss avoided, or 20% of the company or juristic person's annual turnover during the period in which the offence was committed, whichever is greater.the situation in Australia, 112 the Financial Markets Act does not specifically provide whether the FSB may, in addition to administrative proceedings, 113 bring its own criminal proceedings against the market manipulation offenders without initially referring such proceedings to the DPP and the relevant courts in South Africa. 114It is important to note, however, that the enforcement of the criminal sanctions for market manipulation and other related offences has to some extent been impeded by the insurmountable difficulties relating to the high evidentiary burden of proof required in the prosecution of such offences in both South Africa 115 and Australia. 116In addition, the implementation of the criminal sanctions for market manipulation has so far been relatively more successful in Australia 117 than in South Africa. 118This could in part because of the considerable number of cases that have come before the courts in Australia. 119In contrast, relatively few cases involving market manipulation offences have been successfully investigated and prosecuted in South Africa to date. 120112 See the similar comments above.
113 See s 82 of the Financial Markets Act.
114 Apparently, such proceedings may be instituted by the FSB only if the DPP refuses to prosecute the market manipulation cases in question.See s 84(10) of the Financial Markets Act.

Civil penalties
Civil penalties may also be imposed upon any person who violates market manipulation 121 and other market misconduct provisions. 122Currently, such penalties may be imposed only under the civil penalty provisions. 123Put differently, the civil penalty provisions are now applicable to both the market misconduct and continuous disclosure provisions. 124Consequently, civil penalties may be brought against the offenders, either as financial services civil penalties or as corporation or scheme civil penalties. 125e ASIC is statutorily empowered to institute any relevant civil action against the offenders. 126For example, the ASIC may impose civil pecuniary penalties of up to Aus $200, 000 on individuals and Aus $1million on a body corporate, and the recovered money will be utilised to compensate all the prejudiced persons. 127It is noteworthy that these pecuniary penalties were recently increased to enhance the combating of market manipulation and similar practices in Australia. 128In addition, the ASIC may disqualify the perpetrators of market manipulation and other market misconduct offences from the management of any company or corporation for a certain period. 129e ASIC or the courts may declare (publicise) the existence of a violation, when satisfied that a particular person was involved in market manipulation or other related market misconduct offences. 130This publication is employed inter alia to discourage unscrupulous persons from engaging in market manipulation. 131The ASIC may further impose orders for civil penalties for punitive purposes against market manipulation offenders. 132Notably, the ASIC has a discretion regarding the actual amount to be imposed as punitive or pecuniary civil penalties against such offenders. 133In addition, further civil action against the offenders can be brought by the actual prejudiced person (a private right of action) 134 and the relevant courts.For example, a court may, after it is satisfied that the contravention in question will materially prejudice the issuers of the financial products to which it relates, 135 impose a civil compensatory action against the offenders to recover any damages incurred by the affected persons. 136e financial services civil penalties have relatively improved the enforcement of the market manipulation and other market misconduct provisions in Australia to date. 137t differently, despite the fact that the lower standard of proof required in civil cases has not been quite utilised by both the ASIC and the courts to obtain settlements in market manipulation cases, the general enforcement of the market manipulation prohibition has been relatively successful in Australia.On the contrary, apart from the provisions of s 6D of the Financial Institutions (Protection of Funds) Act, 139 the Financial Markets Act's market manipulation provisions do not expressly give rise to civil or administrative 140 liability on the part of the offenders in spite of the fact that they are relatively comparable and commendable internationally, 141 especially with regard to the nature and scope of their application. 142nsequently, it is hoped that South Africa will follow the example of Australia 143 and other relevant jurisdictions on derivative civil penalties for market manipulation, to promptly introduce specific provisions for such penalties in the Financial Markets Act. 144In addition, apart from the provisions of s 6D of the Protection of Funds Act and the available common law remedies, it appears that the affected persons are not statutorily empowered to recover their losses through their own private civil litigation proceedings for market manipulation under the Financial Markets Act. 145Therefore, notwithstanding the fact that private persons do not have resources and investigatory powers similar to those of the FSB to institute the relevant actions against the 139 Financial Institutions (Protection of Funds) Act 28 of 2001 as amended, hereinafter referred to as the Protection of Funds Act. 140 For instance, see s 82 of the Financial Markets Act, which provides that administrative sanctions as determined by the Enforcement Committee (EC) will be paid to prejudiced persons only in cases of insider trading, and there are no other provisions under Ch X entitled "Market Abuse" which expressly empower the courts to impose administrative sanctions against the market manipulation offenders.It appears that a civil remedy which was mainly enforced by the FSB under s 77 read with s 82 of the Securities Services Act has now been replaced by administrative sanctions.In relation to this, the Financial Markets Act now mainly provides for an administrative sanction that may be imposed on the market abuse offenders by the EC.See s 82 read with s 84 of the Financial Markets Act.This could suggest that the EC may now impose administrative sanctions upon the market manipulation offenders after referrals in terms of s 99 of the Financial Markets Act read with s 6A(2) of the Protection of Funds Act, subject to appeals in terms of s 6F read with s 6B to s 6I of the same Act.See further Luiz 2011 SA Merc LJ 151-172; Chitimira 2014 Speculum Juris 119-124.141   The author submits that the Financial Markets Act's market manipulation provisions are relatively comparable to similar provisions in other jurisdictions such as the USA, the UK and the European Union (EU).
Ss 80 and 81 read with s 109(a) of the Financial Markets Act.191-195; 198-199.offenders on their own, it is hoped that the Financial Markets Act will be amended in line with the position in Australia 146 to provide a private right of action for the affected persons to claim their own civil or administrative damages directly from the market manipulation offenders.Moreover, in contrast to the Australian position, 147 the civil remedies and civil penalties for market manipulation are not statutorily classified differently under the Financial Markets Act. 148

Civil remedies
Civil remedies are also available to all the persons prejudiced by market manipulation 149 and other related market misconduct offences. 150For instance, the ASIC may institute civil compensation orders against any person who contravenes the market manipulation and other market misconduct provisions. 151The ASIC has further discretion and authority to determine the actual appropriate civil compensatory remedies that will be granted to any persons affected by market manipulation and other related offences. 152 addition, a private right of action is expressly provided for any persons who incurred losses as a result of market manipulation and other market misconduct violations by way of application for a compensation order. 153This enables the affected persons to claim their civil compensatory damages timeously and directly from the perpetrators of market manipulation and other related offences. 154As stated earlier, 155  courts or the ASIC may make a declaration that certain conduct constituted a market manipulation violation. 156Importantly, the ASIC or any other applicant in a civil action for remedies may rely on such a declaration without being required to further prove the actual occurrence of market manipulation or other related contravention in question. 157A declaration of the contravention of market manipulation or other market misconduct provisions is therefore a useful tool to expedite actions for civil remedies by both the courts and the ASIC. 158rthermore, the ASIC may seek civil or administrative freezing orders or injunctions from the courts against the perpetrators of market manipulation and other market misconduct offences. 159This remedy is, among other things, aimed at directly preventing or stopping the offenders from continuing with a particular illicit conduct or their market manipulation and market misconduct violations. 160In addition, the ASIC or the Australian Securities Exchange (ASX) may take disciplinary action against a market participant or any person who committed market manipulation and other related offences.In essence, this implies that such matters will be brought to the ASX Disciplinary Tribunal, which will then decide on the appropriate civil remedy to be imposed against such offenders. 161y prejudiced person or the ASIC 162 may seek banning orders or disqualification orders from the courts against those who violate market manipulation or other market misconduct provisions. 163Notably, the banning or disqualification orders may be implemented against the offenders permanently or for a specified period. 164 the courts and the ASIC have discretionary powers to determine the exact period under which the accused persons will be banned or disqualified from executing their managerial duties in the affected corporations. 165Moreover, any person who can show or prove that he suffered a loss as a result of the contravention of continuous disclosure provisions will recover his damages from the offenders concerned. 166 a nutshell, although it may be argued that the civil remedies are at the bottom of the Australian securities law enforcement pyramid, which has civil penalties in the middle and criminal penalties at the top, such remedies have to date relatively enhanced the general combating of market manipulation and other related offences in Australia. 167 the other hand, as stated above, 168 apart from the available common law remedies and the provisions of s 6D of the Protection of Funds Act, the Financial Markets Act does not have specific civil remedies for market manipulation. 169This could imply that the Financial Markets Act treats and interprets market manipulation simply as a wrong against the financial markets rather than as a wrong against all the affected persons. 170This may further suggest that its market manipulation prohibition is directed only at the public good and not necessarily at the individual or affected person's protection. 171 It is also submitted that the Financial Markets Act should be amended in line with the Australian approach 190 in order to enact provisions that expressly extend the scope of application of its market manipulation prohibition to other related dishonest conduct such as high frequency trading, front running, short selling and market rigging.In addition, 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 as well as the various types of market manipulation practices, to enhance the combating of such practices in South Africa. 191Lastly, it is recommended that market manipulation should be statutorily treated as an indictable offence for deterrence purposes and to enhance its prosecution in South Africa.Case law Adler v R (2006) ), market manipulation and other market misconduct activities.See related discussion on the regulation of these practices by Huang 2005 Aust Jnl of Corp Law 281-322; Huang 2005 Sec Reg LJ 130-146; Overland 2005 Deakin LR 708, 713-730; Steinberg 2001 U Pa J Int'l Econ L 635, 640-668; Gevurtz 2002 Transnat'l Law 63, 67-78; Gething 1998 C & SLJ 607-618; Goldwasser 1999 ABLR 482-513; Tomasic and Pentony 1989 ANZJ Crim 65-66; Loke 2006 Am J Comp L 123-172; Barnes Stock Market Efficiency 125; Lyon and Du Plessis Law of Insider Trading 159-168. 2 3

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See related remarks by Chitimira 2014 PER 964-965.63 See para 2.3 above.64 Section 80 of the Financial Markets Act.65 Section 80(1)(a) and (b) read with subs (2), s 80(3)(a)-(g) read with subss (4) and (5) of the Financial Markets Act; also see Cassim 2008 SA Merc LJ (Part 1) 42-51, 52-60 and a generally related discussion by Chitimira 2014 PER 937-965.66 (1) and (2) read with subs (3).The same status quo was also stipulated in s 76(1) and (2) of the Securities Services Act; clause 85(1) and (2) of the Draft Financial Markets Bill and clause 83 of the Financial Markets Bill, 2012.69 Section 1041E; also see para 2.3 above.70 Section 81 of the Financial Markets Act.Notably, a similar approach was also provided under s 76 of the Securities Services Act; clause 85 of the Draft Financial Markets Bill; clause 83 of the Financial Markets Bill, 2012.See further Cassim 2008 SA Merc LJ (Part 2) 178.
read with subss (2) and (3) of the Financial Markets Act.Likewise, this approach was previously employed in s 76(1)(a) read with (b) of the Securities Services Act; Cassim 2008 SA Merc LJ (Part 2) 181-182.See further clause 85(1)(a) read with (b) of the Draft Financial Markets Bill and clauses 83(1) of the Financial Markets Bill, 2012, which had related provisions.79 See further Huang 2009 C & SLJ 10; Cassim 2008 SA Merc LJ (Part 2) 181-182.80 Sections 1041D and 1041G of the Corporations Act.Also see para 2.3 above.81 See ss 80 and 81 of the Financial Markets Act.This was also the position under ss 75 and 76 of the Securities Services Act; clauses 84 and 85 of the Draft Financial Markets Bill and clauses 82 and 83 of the Financial Markets Bill, 2012.

189
See the related discussions in paras 3.1-3.3above.190 See Part 7.10 of the Corporations Act.Also see para 2.3 for further analysis of the prohibition on market manipulation and other market misconduct practices under the Corporations Act.If the Dog Catches the Mice: The Civil Settlement of Criminal Conduct under the Corporations Act and the Australian Securities and Investments Commission Act" 2003 Am J Comp L 137-146 Barnes Stock Market Efficiency Barnes P Stock Market Efficiency, Insider Dealing and Market Abuse (Gower Surrey 2009) Baxt, Black and Hanrahan Securities and Financial Services Law Baxt R, Black A and Hanrahan FP Securities and Financial Services Law 6 th ed (LexisNexis Butterworths Chatswood 2003) Benade et al Entrepreneurial Law Benade ML et al Entrepreneurial Law 3 rd ed (LexisNexis Butterworths Durban 2003) Beuthin and Luiz Basic Company Law Beuthin RC and Luiz SM Beuthin`s Basic Company Law 3 rd ed (Botha D "Increased Maximum Fine for Insider Trading: A Realistic and Effective Deterrent?"1990 SALJ 504-508 Overland 2005 Deakin LR Overland J "The Future of Insider Trading in Australia: What did Rene Rivkin Teach Us?" 2005 Deakin LR 708-730 Steinberg 2001 U Pa J Int'l Econ L Steinberg MI "Insider Trading, Selective Disclosure and Prompt Disclosure: A Comparative Analysis" 2001 U Pa J Int'l Econ L 635-668 Tomasic and Pentony 1989 ANZJ Crim Tomasic R and Pentony B "The Prosecution of Insider Trading: Obstacles to Enforcement" 1989 ANZJ Crim 65-66 Trichardt 2003 C & SLJ Trichardt A "Australian Green Shoes, Price Stabilization and IPOs -Part 2" 2003 C & SLJ 75-83 Van Deventer 1999 FSB Bulletin Van Deventer G "New Watchdog for Insider Trading" 1999 FSB Bulletin 2-3 Welsh 2004 Aust Jnl of Corp Law Welsh MA "Eleven Years On: An Examination of ASIC's Use of An Expanding Civil Penalty Regime" 2004 Aust Jnl of Corp Law 175-195 It is stated that the Corporations Law 1990 be focused mainly on the Corporations Legislation Amendment Act 110 of 1990 (Cth), hereinafter referred to as the Corporations Law 1990 and therefore the study of all related Australian securities statutes is beyond the scope of this sub-heading.Consequently, related legislation like the Trade Practices Act 51 of 1974 (Cth) (hereinafter referred to as the Trade Practices Act) as amended by the Trade Practices Legislation Amendment Bill 2005 (Cth), which was passed on 19 October 2006, will be referred to only where necessary.15 The Securities Industry Act 53 of 1970 (NSW), hereinafter referred to as the Securities Industry Act 1970.See s 70 read with s 72(2).See further the relevant provisions of the Securities Industry (Amendment) Act 11 of 1971 (NSW), hereinafter referred to as the Securities Industry Amendment Act; s 109 of the Securities Industry Act 3 of 1975 (NSW), hereinafter referred to as the Securities Industry Act 1975; s 124 of the Securities Industry Act 66 of 1980 (Cth), hereinafter referred to as the Securities Industry Act 1980 and the Securities Industry (Application of Laws) Act 61 of 1981 (NSW), hereinafter referred to as the Securities Industry Application of Laws Act.Also see Constable 2011 MqJBL 54, 58; see further Black and Hanrahan Securities and Financial Services Law 471-472.Generally see s 995 of the Corporations Law 109 of 1989 (Cth), also known as the Corporations Act 1989, hereinafter referred to as the Corporations Law 1989; also see Black 1996 ALJ 987, 997; Trichardt 2003 C & SLJ 75, 83.
14The discussion will Furthermore, all persons are prohibited from carrying out transactions an illegal technique that is employed by market participants like brokers to anticipate the effect and impact of upcoming trading transactions on the price of certain securities in order to engage in market manipulation and other illicit trading activities.See Chitimira May 2014 MJSS 60, 61.These changes were introduced by the Financial Services Reform Act, which amended the Corporations Act's market abuse provisions.See further the Revised Explanatory Memorandum to the Financial Services Reform Bill 2001 (Cth), hereinafter referred to as the Revised Explanatory Memorandum.Also see generally related remarks by Longo 2001 https://goo.gl/31VrsC1-9.See further Huang 2009 C & SLJ 9.
25Front running is See s 1041B(1)(1A) of the Corporations Act.Also see generally the Explanatory Memorandum of the Corporations Amendment (No 1) Bill 2010 (Cth), hereinafter referred to as the Corporations Amendment (No 1) Bill Explanatory Memorandum 3.7 and 3.14.It is hoped that this will, in the long run, improve the enforcement of the market abuse prohibition in Australia.See Constable

of the Supplementary Explanatory Memorandum to the Financial Services Reform Bill 2001 (Cth) (hereinafter referred to as the Supplementary Explanatory Memorandum) and the Revised
Explanatory Memorandum respectively.See further Huang 2009 C & SLJ 10. 1041D of the Corporations Act.Also see generally Hieronymus 1977 Hofstra L Rev 41, 45; Loke 2007 Aust Jnl of Corp Law 22-50; McCabe 1993 Fordham L Rev 207, 223, which comments on the circumstances that are considered necessary when determining if the activity in question should be deemed unlawful and manipulative. of the Corporations Act, which repealed ss 999 and 1261 of the Corporations Law 1990; also see generally Ministry of Economic Development 2002 https://goo.gl/jxUg0K.
38 See s 40 Section 1041E 41 Section 1041F of the Corporations Act.
See Parts 7.7 and 7.9 of the Financial Services Reform Act; also s 1041H(3) of the Corporations Act; the Revised Explanatory Memorandum para 15.10.
48 49See further the Supplementary Explanatory Memorandum paras3.117,3.118.50 May 2014 MJSS 67-68.Also see the relevant provisions of the now repealed statutes, the Stock Exchanges Control Act 1 of 1985, hereinafter referred to as the Stock Exchanges Control Act.See s 40 and the Financial Markets Control Act 55 of 1989, hereinafter referred to as the Financial Markets Control Act, see ss 20 -23.Notably, s 1 of the Stock Exchanges Control Act prohibited the market manipulation of securities, which included stocks, shares and debentures, while the relevant provisions of the Financial Markets Control Act prohibited the market manipulation of financial instruments, as defined in s 1, including futures contracts, option contracts and loan stock on a financial market., 80, 81, 82 of the Financial Markets Act and other related provisions under Ch X of the same Act.Also see further Cassim 2008 SA Merc LJ (Part 1) 34-35; Chitimira 2014 PER 937-965.
52 Generally see Henning and Du Toit 2000 JJS 155-165.53 See earlier comments in para 2.1 above.54 See the related discussion under para 2.2 above.55 57 See the related remarks in paras 2.1 and 2.3 above.58 See ss 78 Similar provisions were previously outlined in s 75(3)(i) of the Securities Services Act; clause 84(3)(i) of the Draft Financial Markets Bill; clause 82(3)(i) of the Financial Markets Bill, 2012; also see Cassim 2008 SA Merc LJ (Part 2) 184-185; the Johannesburg Stock Exchange Limited (the JSE) Listing Requirements, which outlines some obligations or requirements that must be complied with by the issuers of securities before engaging in price-stabilisation in South Africa.See further Rule 5.99 of the JSE Listing Requirements, which stipulates the various circumstances and conditions under which the price-stabilisation measures will be permitted by the JSE and the Financial Markets Act.See ss 80 and 81 of the Financial Markets Act.It appears that the same approach was previously employed in ss 75 and 76 of the Securities Services Act; clauses 84 and 85 of the Draft Financial Markets Bill; clauses 82 and 83 of the Financial Markets Bill, 2012; also see Cassim 2008 SA Merc LJ(Part 2) 198-199.
, as is the position under the Corporations Act in Australia, 100 the Financial Markets Act provides criminal sanctions for market manipulation offences.101Nonetheless, in contrast to the position in Australia, 102 the Financial Markets Act's criminal penalties for market manipulation 103 might be less deterrent, particularly with regard to some unscrupulous big business persons, or companies which may easily afford to pay the R50 million fine and commit other market manipulation offences in the future.104Inthisregard it is hoped that the Financial Markets Act will be amended in line with the Australian position 105 to introduce sufficient and more deterrent maximum criminal penalties for individuals 106 and juristic persons, 107 with much higher maximum penalties being imposed on such juristic persons.108LikeitsAustraliancounterpart, 109 the Director of Public Prosecutions (DPP) in South Africa has the main prerogative to institute criminal proceedings against the perpetrators of market manipulation. 110rthermore, in South Africa the DPP may institute such proceedings only after referrals from the Financial Services Board (FSB).111Nevertheless,unlike Tobias 2010 http://goo.gl/mJBDdj;Bowen2010 http://goo.gl/bLM7eN.Likewise100 See related discussion above.101See s 109(a) read with ss 80 and 81 of the Financial Markets Act, which directly outlaws any conduct which constitutes a market manipulation offence or which may constitute such an offence in South Africa.Also see similar comments in Chitimira 2014 Speculum Juris 108, 119-124; Cassim 2008 SA Merc LJ (Part 2) 193-195.See the related comments above.106 1041H of the Corporations Act.The civil penalty provisions were first introduced in 1993 and are now contained in Part 9.4B of the Corporations Act.
121 Sections 1041A-1041E of the Corporations Act.122 Sections 1041F- John Elliot and William Harrison in relation to their contravention of the market misconduct provisions, as directors of Water Wheel and its subsidiary Water Wheel Mills Pty Limited.Also see Comino 2005 Aust Jnl of Corp Law 48-67.any financial services civil provision was violated, the courts or the ASIC may impose pecuniary penalties up to Aus $200 000 on the perpetrators of such offences.S 1317EA of the Corporations Act read with s 1317FA of the same Act.
133However, where Goldwasser 1998 Aust Jnl of Corp Law 111.See furtherDonald v ASIC (2001)38 ACSR 10; Donald v ASIC[2001]AATA 366, the accused was found guilty of market manipulating the price relating to the affected shares (financial products).For further discussion on the theory, history and application of civil penalties in Australia, see Gething 1996 ABLR375-390; Bird 1996 C & SLJ 405-  427.
and 1317HA of the Corporations Act.This is usually referred to as a private right of action or piggy-back civil rights against the offenders, who are then required to compensate the claimants or the affected investors.
154Sections 1041I It is argued, however, that such affected persons are not statutorily precluded from seeking their own additional civil remedies, apart from See the related discussions by Luiz 2002 JBL 183; Henning and Du Toit 2000 Company Lawyer 29-36; Cassim 2008 SA Merc LJ (Part 2) 192.Also see Chitimira March 2014 MJSS 53-54, for further related analysis.privaterights of action, directly from the market manipulation offenders through the provisions of the Protection of Funds Act 172 or any other relevant legislation.In addition, unlike the situation in Australia, 173 no provision was made in the Financial Markets Act for the competent courts or the FSB to make a declaration of contravention of the market manipulation provisions whenever such contravention occurs.174Asaresult, the preventive and deterrent effect attached to the declaration of contravention by the courts in Australia is obviously absent in South Africa.175Moreover, in contrast to the position Australia, 176 and as already stated above, apart from relying on provisions of the Protection of Funds Act, 177 the EC may seek an administrative compensatory monetary remedy payable to the FSB for later reimbursement to the affected persons only with regard to insider trading violations under section 82 of the Financial Markets Act.178ismerely stated that the FSB may, by notice on its official website or by means of other appropriate public media, publish any outcome, status or details of market abuse investigations if such publication is in the public interest.See s 84(2)(e) read with ss 78, 80, 81 and 82 of the Financial Markets Act.Also see similar remarks in Chitimira and Lawack 2013 Obiter 200-217; Chitimira 2014 Speculum Juris 108-124.This could have contributed in part to the inconsistent enforcement of the market manipulation ban in South Africa.See the FSB Annual Report 2011 99-101 and the FSB Annual Report 2013 128-130, for related comments on the new and completed investigations, related issues on administrative penalties and appeals of market abuse cases in 2011 and 2013 respectively.In relation to this, it is also stated that the Directorate of Market Abuse (DMA) is currently investigating 21 listed companies for market manipulation and other market abuse activities.However, notwithstanding all these commendable efforts to combat market manipulation and other illicit market abuse practices, only 337 cases of market abuse have been investigated in South Africa from 1999 to date.Moreover, about 259 of these cases were closed because there was insufficient or no evidence that the relevant market abuse provisions had been contravened.Consequently, about R95 million damages and penalties were recovered from the offenders in only 72 cases of market abuse which were successfully investigated and settled through the FSB during the same period.See the DMA 2014 FSB Bulletin 8.As highlighted above, 179 it is noteworthy that the prohibition of market manipulation was introduced relatively early in both South Africa and Australia.For instance, market manipulation has been discouraged under common law in both South Africa 180 and Australia. 181It is also interesting to note that relatively similar enforcement approaches 182 are employed to combat market manipulation in both South Africa and Australia. 183Moreover, relatively similar types of market manipulation are statutorily prohibited in both jurisdictions. 184However, notwithstanding these commendable efforts, some flaws are still present in the current South African and Australian market manipulation prohibition.For example, the available criminal penalties for market manipulation are still not sufficient of a deterrent for the purposes of increasing the curbing of market manipulation activities in Australia and South Africa. 185Consequently, it is submitted that the Corporations Act and the Financial Markets Act should be amended in order to enact higher separate and distinct maximum market manipulation criminal penalties for both individuals and juristic persons. 186It is further recommended that the Commonwealth DPP and the DPP should continue to cooperate with the ASIC and the FSB respectively in order to consistently enhance the criminal prosecution of market manipulation cases in Australia and South Africa. 187It is also submitted, notwithstanding the purported paradigm shift from the old civil penalty regime 188 to administrative penalties for market abuse in South Africa, that 179 See the historical analysis and other relevant discussions in the sub-headings under para 2 above.criminal and administrative penalties are used to discourage market manipulation in both South Africa and Australia.Moreover, the Commonwealth DPP and the DPP have the main prerogative to institute criminal proceedings against market manipulation offenders in Australia and South Africa respectively.See the related discussions in paras 3.1-3.3above.in para 3.1 above and similar remarks by Chitimira March 2014 MJSS 53-56; Chitimira 2014 Speculum Juris 119-124; Chitimira & Lawack 2012 Obiter 548-553.See s 77 of the Securities Services Act.and administrative penalties should be expressly extended to both insider trading and market manipulation under the Financial Markets Act. 189 173See the related comments above.174 Put differently, it S 82 read with s 99 of the Financial Markets Act; s 6A(2) of the Protection of Funds Act.See further related analysis by Cassim 2008 SA Merc LJ (Part 2) 195; Luiz 2011 SA Merc LJ 151-172; Chitimira 2014 Speculum Juris 119-124.Also see similar remarks in para 3.2 above.182 For instance, 185 See the related remarks in para 3.1 above.186 See the discussion Samuel 2005 http://www.accc.gov.au/Samuel_Paper_2005.htmSamuel G 2005 Cartels, Criminal Penalties and The Leniency Policy http://www.accc.gov.au/Samuel_Paper_2005.htmaccessed 12 March 2014 Van Deventer 2008 http://www.fsb.co.za/public/marketabuse/FSBReport.pdfVan Deventer G 2008 Anti-Market Abuse Legislation in South Africa http://www.fsb.co.za/public/marketabuse/FSBReport.pdfaccessed 5 May 2014