Source: http://newcmkx.proboards.com/thread/7080/common-sense
Timestamp: 2019-04-23 04:11:12+00:00

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I have been around computers and the internet for a long time. While I have always enjoyed both, the markets have more of a fascination for me, I enjoy watching the “announcement” of bad guys being caught and see the "incredible games" they played. In the current market place, these games are played by market makers, brokers, traders and many other individuals and or various groups and to that end, I wanted to voice some thoughts on these activities as perpetrated by the "big players," who eventually get caught, charged and paid huge fines many times for stock market manipulation and those who get away..
If many manipulators are engaged in deceptive practices, average traders seeking valid information about a firm’s prospects and the true value of its stock may be driven out of the market, thereby reducing its efficiency. Although it’s too late to help those who lost money on Enron, Worldcom or Tyco, there are lessons to be learned. Stocks involved in litigation with the Securities and Exchange Commission over stock-market manipulation from 1990 to 2001, have as analysis and modeling shown, occur in small, illiquid markets, such as the OTC Bulletin Board and the Pink Sheets, which have much lower disclosure requirements for listed firms and less stringent securities regulations.
“Stock Market Manipulation at these levels often includes corporate insiders, brokers, underwriters, large shareholders and market makers as the more likely suspect stock manipulators. The reason, these individuals are close to the information loop, so it is easier for them to pose as informed parties who have knowledge about the future value of stocks.
Sound like anyone we have recently become aware of?
The most common type of manipulation is inflating the stock price through wash trades and the use of nominee accounts (owned by essentially the same individual or group). The increased trading volume and price often attract the attention of investors or information-seekers. Some manipulators also gain unfair advantage by spreading false information through stock promoters, news releases, SEC filings and Internet chat rooms and bulletin boards to encourage other information-seeking investors to purchase shares.
The more information-seekers who can be drawn in, and the greater the market’s uncertainty about the true value of the stock, the higher the manipulator’s returns are likely to be, the researchers say. Manipulation also increases stock volatility, with stock prices rising throughout the manipulation period and then falling afterward.
Government regulators must play a strong role in discouraging manipulation while encouraging greater competition for information.
In reality, there are so many “Big players” that go uncaught, it’s impossible to determine if the action of enforcement is viable? That is to say, is it viable without a truly concerted effort to “identify and prosecute the bad guy?
Despite the SEC's claims of tough enforcement, its actions suggest it is content mostly with press releases, the theory being that enforcement in a few high-profile cases will deter future acts by many potential defrauders at all levels and not just the standard "pump and dump" schemes For example, on the Eve of Christmas in December of 1997, when all was quiet on Wall Street, Nasdaq market makers quietly agreed to pay a $1 billion fine to settle a class action suite that investors brought against them.
So please don't delude yourself into thinking that everything that goes on in the markets is what it really looks like! Or that bringing a grass roots pressure to bear on “perceived” bad guys will impact the illegality of stock manipulation. Many times when reviewing the basis for charges of stock manipulation, you will see words that sound like they came out a of a 1940’s pulp fiction novel, "Collusion," "gouging," "extortion," you name it!
I know, just based on reviewing the commentary of shareholders speaking about the past activities of CMKX, Inc, some feel that the marketplace and those who regulate and run it, will pull the rug out from under their feet to ensure illicit gains for themselves.
For example, when certain stocks are really hot and they are gaining 8% or 12% a day, do you realize how many people see that and figure... "I'll just buy into these stocks and make a fortune?" Well, guess what? CMKX was not a “hot” stock, if you review the PRS, you will see that it was simply a highly touted stock, the “stock play of a lifetime,” “ a force to be reckoned with.” That has yet to be seen.
But one thing is certain, the market makers are making money and so are many others, simply by taking ours (shareholders). Of course, as we see by recent SEC activities, whenever something about a company’s stock and activities gets into too much of a pattern, the market (SEC) will “INTEREVENE” to pause, reverse or halt the stock’s course for the “protection” of the investors.
This is the more sinister side of the market and although you won't find any paper trail or "proof", the fact is that "wholesale moves" are quite often... planned. Can you figure out why the banks fell like rocks and low-caps started flying? Did all those fund managers come upon the same idea at exactly the same day? So, what do we do when it appears that certain moves can be "instituted?"
Playing the market is somewhat like driving defensively. You always have to be ready to anticipate what the other driver will do. You have to anticipate what the market is going to do and stay with the trends. If the market runs a sector, you will run with it, but you will also be waiting for the turn and be very fast to bail out.
If the big players want to take cash out of i.e. bank stocks and buy into another sector's stocks you have to have a good idea of that sector's stock before all the money gets there. Often all it takes for a major reversal is for a few fund managers to see that a competing manager is selling a portion of his portfolio... and boom! They are all selling for all they're worth. Why? They don't really know! But maybe "HE" knows something!
When money is being made in fistfuls, get ready for the wholesale sell off. Be prepared with your stop loss orders in place. Be quick to take your profits. To beat them at this game you definitely need an edge and the edge is to always be prepared for their next move!
A lot of people don't understand the games that are played in the marketplace and have taken big and sudden losses. Ever wonder why conventional thinking says, "Invest for the long term and ignore the daily ups and downs?" It is because the market as a whole has been and will keep going up!
But along the way market makers and other “institutions” will be making their upgrades and downgrades, and taking money from traders who don't know how the game is played, both legally and illegally.
You can "play this game" and win, but you must learn what to look for! So don’t underestimate the tenacity and ability of the “big players” to separate you from your money…..Don't let them!
The SEC warns that an investor should "never, ever, make an investment based solely on what [he] read in an online newsletter or Internet bulletin board, especially if the investment involves a small, thinly-traded company that isn't well known." See "SEC Charges 44 Stock Promoters in First Internet Securities Fraud Sweep," Rel. No. 98-117.
From this premise, it is arguable that a reasonable investor would not have been swayed by the false or misrepresented information and therefore, the information is immaterial as a matter of law. See Parnes v. Gateway 2000, 122 F.3d 539, 546 (8th Cir. 1997). As silly as this sounds, many online traders log-on to chat-rooms for their investing advice.
Would a reasonable investor really do such a thing? It is seemingly absurd for investors to rely merely on Internet chat-room messages as their "total mix" of information, particularly where the stock of public company is involved. In cases of small cap stock fraud, given the limited total mix of information, a purchase or sale based on Internet manipulation is arguably more reasonable than fraud involving large-cap stocks. In the case of large cap public companies where information is widely available, liability for investors' losses should not be solely placed on the alleged market manipulator.
There are types of statements and omissions, where a defrauder might possibly be able to manipulate the price of a stock without such manipulation being deemed "material" and thereby subjecting the manipulator to liability. For example, vaguely optimistic false statements on which a reasonable investor would not rely are not material. See Raab v. General Physics Corp., 4 F.3d 286, 289-90 (4th Cir. 1993); and Picard Chem., Inc. Profit Sharing Plan v. Perrigo Co., 940 F. Supp. 1101, 1122 (W.D. Mich. 1996). It appears that this is what was going on in the Lebed and Georgetown Law Student cases.
As investors log onto the Internet and point and click their way through cyberspace in search of the next big stock tip, they should keep in mind the absurdity in relying solely on Internet chat-room advice in purchasing securities, and they should be generally cautious of information contained in online newsletters.
Absent such precautions, the parties on whom to place most of the blame may be those eager investors who turn a blind-eye to the total mix of information and merely rely on information that is arguably not "material" under the law.
Perhaps the "materiality" standard provides the best argument for shielding Internet manipulators. The materiality standard requires that "there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available." See TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 96 S.Ct. 2126, 48 L.Ed.2d 757, 766 (1976); and Basic, Inc. v. Levinson, 485 U.S. 224, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988).
Of course, the investing public is not required to solely rely on SEC enforcement actions. A private right of action under Section 10 of the 1934 Act exists against those who commit a manipulative or deceptive act in connection with the purchase or sale of securities. See Santa Fe Indus., Inc., 430 U.S. at 475. More specifically, the stock manipulation must constitute: (1) a scheme relating to the purchase or sale of stock, which includes (2) mistatements or omissions, (3) of material facts, (4) made with scienter, (5) upon which [the plaintiff] relied, (6) causing [plaintiff's] injury, and (7) touching upon the loss in value of the stock. See Huddleston v. Herman & Maclean, 640 F.2d 534, 543 (5th Cir. 1981). See also, Chemetron Corp. v. Business Funds, Inc., 718 F.2d 725, 728 (5th Cir. 1983).

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