Ending Rumourtrage - Australian regulator proposes guidelines on spreading rumours in markets

Rumourtrage – trading based on rumours – can move markets, is often proven to be nonsense and allows market manipulation.  But it is hard to track and stop and share prices can be battered before companies get the chance to respond.

Australia’s corporate regulator, The Australian Securities and Investments Commission (ASIC), is concerned that confidence in the integrity of markets can be undermined by rumourtrage and has released proposed guidelines on rumours.  ASIC began an investigation following short selling in the Australian market last year when it was believed false and misleading rumours were being spread to drive down share prices in some companies.

In its consultation paper Responsible handling of rumours, the regulator proposes regulations and guidelines for market participants, while saying it does not seek to impede the flow of rational opinion.

ASIC wants the financial services industry, which it licenses, to adopt standards for dealing with rumours.  These would include:
-    Licensees should not start a rumor and only spread it if the message is reasonable and circulated widely.
-    Originating rumours would be prohibited

Licensees would have to train staff in how to differentiate between rumour and opinion and have a log for writing down the details of the rumour, including where it came from and who started it.  They would also have to record attempts to find out whether the rumour was true.

ASIC proposes defining rumours as: “ a statement containing ‘unverified information, purporting to be fact, that a reasonable person would expect to have a material effect on the price of a security if it were widely circulated’. ”


www.asic.gov.au