Unit 6: Securities Fraud and Market Manipulation
6.1 Definition and Forms of Securities Fraud
Securities fraud = the deception on the market — the falsehood-or-concealment that corrupts the investment decision or the price’s integrity. The forms’ gallery (the exam’s classified list):
- The issuer-fraud: the false prospectus-and-accounts (the cooked books; the inflated revenues; the hidden liabilities — the Enron tradition, by name for the case study), the fake disclosures.
- The transaction-fraud: the broker’s churning (the commissions’ overtrading of the client’s account), the unauthorised trading, the misappropriation of the clients’ securities-and-money (the broker-scandals’ Nepali history), the front-running (the broker’s own trade ahead of the client’s order).
- The scheme-fraud: the Ponzi structure (the fictitious returns paid from the new investors’ principal — the Madoff name; Nepal’s own Unity Life saga, Unit 9’s case), the pyramid selling’s network-variant, the boiler-room-and-pump-and-dump pairing (the false promotion + the insiders’ exit sale).
- The professional-fraud: the auditor’s-and-rating’s corruption (the certificates sold), the advisor’s conflicts concealed.
6.2 Market Manipulation Techniques
The price’s forgery (the manipulation’s mechanics — the exam’s techniques):
- Wash trades (the same beneficial owner’s buy-and-sell — the volume’s fake).
- Matched orders (the accomplices’ offsetting orders — the price’s agreed fiction).
- Marking the close / painting the tape (the session’s end-trades to fix the closing price — the valuation-and-margin’s target).
- Cornering (the security’s-or-supply’s control — the squeeze on the shorts-and-buyers).
- Ramping-and-capping (the sustained buying-or-selling to start the momentum — the herd’s herding).
- The rumour-and-tip campaigns (the false news’ seeding — the social-media era’s acceleration).
- The spoofing-and-layering (the fake orders’ placement-and-cancellation — the algorithmic era’s faces).
- The index-and-basket games (the heavy scrips’ driving to move the whole market — the NEPSE’s banking-heavy index’s particular vulnerability).
This is a preview. The complete Securities Law notes — full unit, Exam Focus box and model questions — are in the PDF / full version. Get the complete notes →