Recruiting figureheads is a common tactic among market manipulators. The question remains why anyone would willingly become a figurehead and allow others to control their accounts?
People who often assume figureheads are likely to be relatives or associates of the market manipulators. In fact, manipulators often target those who have nothing to do with them, as this helps camouflage their illegal acts. To incentivise people to willingly cede control of their accounts, manipulators typically offer regular payments as reimbursements, and guarantee that they would not be liable for any trading losses.
And what’s the harm in making some money by lending your account? There is a heavy price to pay. The reason why market manipulators compensate their figureheads is because these accounts are being used for illegal acts, such as market manipulation or planting votes at shareholder meetings.
Figureheads are not free of wrongdoing. Their account activities are in fact smokescreens for these operations and they will eventually be caught by the authorities. As a matter of fact, regulator investigations into market violations often start from dubious transactions in figurehead accounts. For instance, when an average retail investor account records exceptionally frequent transactions of huge sums, when only one or two stocks are traded in an account over a long period of time, or simply if the funds in the account is deemed suspicious.
For those who think that lending their account is not a big deal, apart from being liable for criminal or civil charges for participating or assisting in market manipulators’ illegal acts, figureheads may also face civil proceedings brought by the SFC. Additionally, the SFC may apply to the court for an injunction order to freeze the assets in the figurehead’s account, or issue a restraining order to prohibit the brokerage firm or anyone from accessing the account to trade stocks or withdraw money from it.
Lending an account – No Way!
If you do not want to find yourself in the trouble with the law, do not lend your account to anyone and keep the following in mind:
- Be on the alert if relatives or friends ask to borrow your account.
- Investors can open a discretionary account with a broker authorizing trading of certain types of stock. However, it is unusual if a broker pays you to open a discretionary account and assures you that you will not be responsible for the losses or profits in the account. Don’t be fooled.
- If you have an online investment account, do not share your login details with others and let them have control over your account.
More:
Beware of manipulative tactics
Comic series:
Do not become a figurehead for market manipulators (in Chinese)
Lending an account - No Way! (in Chinese)