ASIC warns on EOY price manipulation

In what could be regarded as a pre-emptive strike ahead of assuming real-time supervisory control of Australian markets, the Australian Securities and Investments Commission (ASIC) has warned mutual fund and portfolio managers against so-called “window dressing” — the practice of embellishing year-end performance.

ASIC’s deputy chair, Belinda Gibson, warned against the practice, describing it as a deliberate strategy of price manipulation to improve the appearance of portfolios or funds ahead of presenting information to clients and shareholders.

“Window dressing distorts a portfolio valuation at a time that may benefit a fund manager and to the detriment of current and potential unit holders,” she said.

Gibson said that as a result of such practices, investors might not only be looking at their fund’s performance through rose coloured glasses, they might also be paying higher performance fees than were necessary.

She said stock brokers and indirect market participants needed to be wary of clients placing orders close to the close of business on 30 June, which might set a closing price for a security higher than would otherwise be the case.

Gibson said ASIC’s real-time surveillance system was already in place and that both ASIC and the Australian Securities Exchange surveillance teams would be monitoring end of financial year trading and exchanging notes.