Broking firms should play a bigger role in preserving market integrity

A CURTAIN may have been drawn over the penny stock crash of 2013 with the recent conviction of the parties behind the manipulation, but the episode nevertheless raises pertinent questions regarding the role of the broking community in a disclosure-based market that relies on the principle of “caveat emptor’’ or “buyer beware’’.

The crash came about when the prices of three penny stocks -- Blumont, Asiasons and LionGold (known collectively as BAL), which had been ramped up, via an extensive web of trading accounts, more than eight times in a few months -- were brought plummeting down to earth following SGX RegCo’s intervention in Oct 2013. That crash reverberated around the local market and wiped out more than S$8b of the market’s value.

Subsequent investigation revealed that 187 trading accounts held with 20 financial institutions, and which belonged to 58 individuals and companies, had been used by the masterminds. of the manipulation scheme.