False Transaction vs Wash Trading: Addressing the Gap to Rebuild Market Confidence (Legal Implication in Indonesia and United States Capital Market Law)
DOI:
https://doi.org/10.15294/jllr.vol5i1.2094Keywords:
false transaction, wash trading, market manipulation, legal comparisonAbstract
This paper is evidently about the legal comparison between Indonesia and the U.S on their views on market manipulation. There are several similarities between the Capital Market Law and SEA 1934, not only in terms but also in the elements. Articles 91 and 92 of Capital Market Law seem to mimic Section 9(a) (1) and (2) of SEA 1934. As both statues states similar prohibition in creating a misleading trading appearance and the purpose of inducing sales. This means that elements and tests applicable in the U.S. should also be applicable in Indonesia. Section 10(b) of SEA 1934 and SEC Rule 10b-5 serves to further supplement the application of Section 9 with its broad anti-manipulation provisions. Articles 91 and 92 of Capital Market Law cover the sales and purchase of stocks affected by the alleged manipulation that occurs only in the securities exchange as evident by the wording “on a/the Securities Exchange”. This is also observed in Section 9(a) (1) and (2) of SEA 1934 wherein the scope is limited to transactions in the “national securities exchange”. What this implies is that over-the-counter and block sales transactions are not protected under the statutes mentioned above. This issue is not addressed under the Capital Market Law, however Section 10(b) of SEA 1934 and its implementing regulation SEC Rule 10b-5 addresses this issue. Section 10(b) of SEA 1934 allows for broader authority of law enforcement as it includes “any security registered on a national securities exchange or any security not so registered”. This implies protection for a wider scope of securities transactions.
References
Abramova, M., Dubova, S., and Krivoruchko, S. Marxism and Digital Money as a New Reality of Social and Economic System. M. L. Alpi. New York: Information Age Publishing Inc., 2020.
Avgouleas, Emilios. “The Mechanics of Market Manipulation.” Edited by Emilios E Avgouleas. The Mechanics and Regulation of Market Abuse: A Legal and Economic Analysis. (Oxford University Press, September 1, 2005).
Binz, Oliver, and John R Graham. “The Information Content of Corporate Earnings: Evidence from the Securities Exchange Act of 1934.” Journal of Accounting Research 60, no. 4 (September 1, 2022): 1379–1418.
Birnbaum v. Newport Steel Corp., 98 F. Supp. 506 (S.D.N.Y. 1951) (1951).
Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975) (1975).
Chang, Kun Young. “The Effective Regulation of Transnational Securities Fraud in Global Markets.” Journal of International and Area Studies 12, no. 2 (January 2, 2005): 77–92.
Court, U.S. Supreme. Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976) (1976).
Diamond, Peter A. “What Stock Market Returns to Expect for the Future?” Social Security Bulletin 63, no. 2 (2000): 38–51.
Fox, Merritt B, Lawrence R Glosten, Gabriel Rauterberg, Merritt B Fox, Lawrence R Glosten, and Gabriel V Rauterberg. “University of Michigan Law School Scholarship Repository Stock Market Manipulation and Its Regulation Stock Market Manipulation and Its Regulation” 1, no. 1 (2018): 67–126.
Fried, Jesse M., Paul Ma, and Charles C. Y. Wang. “Stock Investors’ Returns Are Exaggerated.” SSRN Electronic Journal, no. November (2021).
Gamble, Jocelyn E. “Stir-Fried Stocks” Modern China 23, no. 2 (1997): 181–215.
Gede Wirama, Dewa, Gusti Bagus Wiksuana, Zuraidah Mohd-Sanusi, and Soheil Kazemian. “International Journal of Economics and Financial Issues Price Manipulation by Dissemination of Rumors: Evidence from the Indonesian Stock Market.” International Journal of Economics and Financial Issues 7, no. 1 (2017): 429–34.
Graham v. S.E.C, 222 F.3d 994 (D.C. Cir. 2000) (n.d.).
Gurley, John G. “Comments.” Journal of Economic Issues 14, no. 2 (January 2, 1980): 539–42.
Hao, Yuna, Behrang Vand, Benjamin Manrique Delgado, and Simone Baldi. “Market Manipulation in Stock and Power Markets: A Study of Indicator-Based Monitoring and Regulatory Challenges.” Energies 16, no. 4 (2023): 1–28.
Heath, Robert. "Securities and Exchange Commission", in Encyclopedia of Public Relations (London: SAGE Publication, 2014).
In Re Olympia Brewing Co. Securities Litigation, 613 F. Supp. 1286 (N.D. Ill. 1985) (n.d.).
Keller, Elisabeth, and Gregory A. Gehlmann. “Introductory Comment: A Historical Introduction to the Securities Act of 1933 and the Securities Exchange Act of 1934.” Ohio State Law Journal 49 (1988): 329–52.
Kenton, Will. Securities Act of 1933 Definition, Investopedia.Com § (2020). https://www.investopedia.com/terms/s/securitiesact1933.asp.
Khodabandehlou, Samira, and Seyyed Alireza Hashemi Golpayegani. “Market Manipulation Detection: A Systematic Literature Review.” Expert Systems with Applications 210 (2022): 118330.
Larry, Dennis K. "Securities-Securities Exchange Act of 1934-Section 10 (b)-Securities and Exchange Commission Rule 10b-5-Birnbaum Rule." Duquesne Law Review 13, no. 2 (1974): 358.
Liu, Derek, Francesco Piccoli, Katie Chen, Adrina Tang, Victor Fang Ph D, Anchain Ai, and San Jose. “NFT Wash Trading Detection.” Arxiv, 2023, 1–9.
Milwaukee, Archdiocese O F, and Supporting Fund. Supreme court of the United States, 34 Black Scholar 21–23 (2004).
Pratama, Anugrah Muhtarom, et al. “The Regulation of Disorgement in the Indonesia Capital Market: Remaining Concerns and Lessons From U.S.” Journal of Indonesian Legal Studies 7, no. 2 (2022): 585-632.
Rajgopal, Shivaram, and Roger M White. “Stock Trades of Securities and Exchange Commission Employees.” The Journal of Law and Economics 60, no. 3 (August 1, 2017): 441–77.
“Regulation S-X under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940, Form and Content of Financial Statements..,” n.d. https://search.library.wisc.edu/catalog/999687160902121.
Rock, Vickie Lorene, and Petitioner V. Arkansas. “Supreme Court of the United States.” International Journal of Clinical and Experimental Hypnosis 38, no. 4 (1990): 219–38.
“Securities Exchange Act of 1934,” Pub. L. No. June 6, 1934, chaps. 404, title I, §1, 48 Stat. 881 (n.d.). https://uscode.house.gov/statviewer.htm?volume=48&page=881.
U.S. District Court for the Southern District of New York - 153 F. Supp. 2d 489 (S.D.N.Y. 2001) (n.d.).
Victor, Friedhelm, and Andrea Marie Weintraud. “Detecting and Quantifying Wash Trading on Decentralized Cryptocurrency Exchanges.” Arxiv 2 (2021).
Wachter, Victor von, Johannes Jensen, Ferdinand Regner, and Omri Ross. NFT Wash Trading: Quantifying Suspicious Behaviour in NFT Markets, 2021.
Downloads
Article ID
Published
Issue
Section
License
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
All writings published in this journal are personal views of the authors and do not represent the views of this journal and the author's affiliated institutions. Author(s) retain copyrights under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0).
