• MAS and the SGX’s regulatory unit warned the investing public here to be on alert over online chatter about share trading
• The warning follows wild speculative investing in the US in an obscure firm called GameStop, fuelled by chatter on a Reddit forum
• MAS and SGX Regulation said online discussions here suggested such speculative trading could occur here

SINGAPORE — Market regulators here on Tuesday (Feb 2) warned the investing public to be on “heightened alert” over the risks posed by trading in shares incited by online chatter following the recent trading frenzy over GameStop shares in the United States.

In a joint statement, the Monetary Authority of Singapore (MAS) and the Singapore Exchange’s regulatory unit said: “Discussions in online websites and platforms suggest the possibilities for similar speculative activities in the Singapore stock market.”

The regulators added that they are closely monitoring market activities for signs of false trading or other forms of misconduct.

In the past week, amateur traders from the Reddit forum r/WallStreetBets collectively drove a meteoric rise in the stock price of US-listed GameStop, a previously obscure American video game and consumer electronic retailer.

Their stated goal was to retaliate against hedge funds that had been short-selling the stock, that is, betting that its share price was going to fall. These large private funds do this by borrowing shares to sell immediately, with the goal of scooping up the stock later at what they expect to be a lower price and profiting from the difference.

Some hedge funds suffered huge losses, totalling US$12.5 billion according to one report, as the small investors who banded together via Reddit drove GameStop’s share price higher. The stock is now trading at levels well below its peak last Thursday, which could spell hefty losses for some of the small investors, too.

In their statement, MAS and the Singapore Exchange Regulation (SGX RegCo) noted that investors here have shown interest in the recent activities in the US markets relating to GameStop as well as other companies such as AMC Entertainment Holdings and Blackberry.

They cautioned that some individuals may exploit the heightened interest generated online for their own benefit by resorting to “pump and dump” activities. This can amount to market misconduct under the Securities and Futures Act.

“Pump and dump” is a method of artificially inflating the market price of a stock in order to gain by selling the stock before the price falls again.

MAS and SGX RegCo warned that perpetrators here may adopt this method by using social media chat groups to encourage individuals to buy certain shares in a similar manner to how the US investors collectively pushed up share prices there.

As soon as the prices of the shares have risen to specific levels, the perpetrators may then sell the shares that they had accumulated earlier without alerting other investors, the authorities said.

“Any conduct that intentionally, knowingly, or recklessly creates a false or misleading appearance regarding the active trading, market or price of securities is prohibited under the Securities and Futures Act,” they added.

Prohibited acts under the Act include the making or dissemination of false or misleading statements, fraudulent inducements to deal in securities, and the employment of manipulative and deceptive devices.

Firm action will be taken against those who breach the Act or other laws and regulations, they said.

The regulators added that restrictions may be placed on the trading accounts of those suspected of such misconduct and the relevant shares may be placed under designation or suspension.

The authorities are also working closely with SGX member firms to ensure Singapore’s markets remain orderly.