Market Manipulation and Directors Fiduciary Duty of Care
Market manipulation of emerging or small cap companies is pervaasive on Wall Street and according to the SEC has increased over 37% in the last decade. The nature and scope of market manipulation schemes is limited only by the creativity and audacity of their perpetrators. While the substance and mechanics of market manipulation schemes may differ, the objective is the same – to inject false information into the marketplace that artificially affects the price of the target companies securities by “interfering with the natural interplay of the forces of supply and demand.” The proliferation of market manipulation scshemes has created challenging risk-management and best practice issues for the directors of targeted companies, which require directors to continuously assess the nature and scope of their fiduciary duty of care.
Note: Market manipulation schemes including, among many others, naked short-selling, spoofing, insider trading, and the unlawful use of fully paid customer shares held in segregated accounts.
PDF (10 Pages): Warsha Burstein on Market Manipulation Duty of Care