An
Auckland-based retail investor has been ordered to pay a penalty of NZ$198,000
after being found liable for market manipulation on the New Zealand Stock
Exchange (NZX). The ruling brings to a close a civil case brought by the
Financial Markets Authority (FMA) against Kok Ding Cheng, who the court found
deliberately placed a series of small buy orders in late 2020 to influence the
price of shares in Rua Bioscience Limited (NZX: RUA).

Investor Ordered to Pay
$198,000 in Market Manipulation Case

Between
November 20 and November 30, 2020, Cheng placed five small buy orders for Rua
Bioscience shares through his ASB Securities account. These orders ranged in
size from 100 to 1,000 shares and carried values between $59 and $540 each. At
the time, Cheng already held a material stake in the company-320,000 shares,
purchased earlier that month at an average price of $0.57 per share.

The FMA
alleged, and the High Court found, that these late-day orders lacked a genuine
commercial purpose and were designed to push Rua shares higher at the close of
trading. Evidence showed that the trades, mostly placed during the pre-close
session, were inconsistent with Cheng’s normal trading patterns, which
typically involved much larger volumes.

“The timing
and size of the orders were hallmarks of closing price manipulation,” Justice
Robinson wrote in the decision, noting that Cheng’s actions were more
consistent with an intent to influence price than with legitimate share
accumulation.

Manipulative Trades and
Broker Controls

Of the five
orders placed, only one was executed; the remaining four were blocked by ASB
Securities’ automated compliance systems, which flagged the transactions as
potentially manipulative. The trade that was executed-an order for 300 shares
placed at $0.54 each-increased the closing price by one cent (approximately
1.9%), boosting the reported value of Cheng’s Rua holdings.

Broker
surveillance played a central role in identifying the suspicious activity. ASB
Securities reported the trades to the NZX frontline regulator, NZ RegCo, which
in turn referred the case to the FMA for further investigation. According to
the regulator, robust brokerage controls are critical to preserving the
integrity of licensed markets.

Court Findings and Penalty

The High
Court ruled that Cheng’s conduct breached Section 265 of the Financial Markets
Conduct Act 2013, which bans trade-based market manipulation. Specifically, any
actions likely to create a false or misleading appearance of market activity or
price.

In
determining the penalty, the judge considered the deliberate nature of the
conduct, sustained over several trading days, and the potential impact on
market integrity. Although only one of the manipulative orders resulted in a
trade, the court found that even unexecuted orders can be harmful, as they
distort perceptions of demand and price among other market participants.

The
NZ$198,000 penalty-set after a 10% reduction for Cheng’s lack of previous
violations-will be paid to the Crown, after the FMA’s enforcement costs are
covered.

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FMA’s Warning to Investors

FMA Head of
Enforcement, Margot Gatland, said the case reinforced the need for vigilance
among retail investors using online trading platforms:

“Market
manipulation undermines confidence in financial markets because it means
investors can’t trust prices or market activity to be genuine. We take cases of
market manipulation seriously to ensure New Zealand’s markets reflect genuine
supply and demand, in order to preserve their integrity and reputation.”

Gatland
further urged all investors to familiarize themselves with their obligations
under New Zealand market rules, emphasizing that breaches, whether large or
small, threaten the fairness and transparency that underpin the country’s
capital markets.

In mid-April, the FMA also issued a warning about an investment scam operating via WhatsApp that promised unrealistically high returns.