Legal Definitions - manipulation

Definition: Manipulation in securities refers to the illegal practice of artificially raising or lowering the price of a security by creating the illusion of active trading. This practice is prohibited by the Securities Exchange Act of 1934.

For example, a group of investors may collude to buy and sell a particular stock among themselves, creating the appearance of high trading volume and driving up the price of the stock. Once the price has risen, they may sell their shares to unsuspecting investors at the inflated price, making a profit.

Another example of manipulation is when a trader spreads false rumors about a company to create panic among investors and cause them to sell their shares, driving down the price of the stock. The trader can then buy the shares at the lower price and sell them later at a higher price, making a profit.

These examples illustrate how manipulation can distort the true value of a security and harm investors who are not aware of the manipulation.