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By Byron Kaye
SYDNEY (Reuters) -Australia's securities regulator has contacted internet share trading forums to question them about policing of "pump and dump" scams on their platforms, a sign of growing scrutiny of an investment subculture that soared during pandemic lockdowns.
The Australian Securities and Investments Commission (ASIC) told Reuters it has boosted surveillance of local retail trading internet chatrooms that have sprung up since the "WallStreetBets" Reddit chatroom was linked to wild U.S. stock fluctuations this year.
That has led to discussions between the regulator and several operators of the profanity, irony and meme-laden chat forums - who often operate anonymously - about their liability if they allow share inflation schemes to flourish.
"If we see concerning conduct that looks as though it was a clear 'pump and dump' that would result in a market manipulation case, there is appetite within ASIC to take those matters forward," said Calissa Aldridge, ASIC's senior executive leader of market supervision.
The strategy shows how a trading frenzy around U.S. video game chain GameStop Corp (NYSE:GME) and other so-called "meme" stocks in recent months has reshaped enforcement practices by regulators around the world.
Retail investors currently account for 15% of trades on Australia's A$2 trillion ($1.6 trillion) stock market, compared to 10% before COVID-19 lockdowns sent most workers and students home. The proportion peaked at 20% in January amid reports of massive gains associated with WallStreetBets, ASIC says.
When suspected market manipulators operated in forums anonymously, ASIC was prepared to identify them by cross-checking the claims they posted online with verified trading data and Australian Taxation Office records.
"We have seen lots of examples ... where there's people who are talking about what they've just done with their trading - some post a snapshot of their trading accounts with trades that have gone through - in some cases we can reverse engineer that (to) look for the identities of the individuals," said Aldridge.
'ROCKET EMOJIS'
Moderators of Reddit forum ASX_Bets, one of the country's most popular trading chatrooms with 68,400 anonymous members, said they spoke to an ASIC representative in March.
ASIC requested they delete a joke in the page's Frequently Asked Questions that "lots of Rocket Emojis were indicators of a winning stock", but "other than this, we have not changed any behaviors nor were we requested to," ASX_Bets moderators said in an email, without giving their names.
The moderators said the group, which started in March 2020, bans members from "pumping" stocks and attaches notifications for company representatives who post "to make it clear they are not a neutral party".
John Rye, founder of Facebook (NASDAQ:FB) group "Asx Stock Tips", which has 20,100 members since starting earlier this month, said he had not been approached by ASIC and was unconcerned about any attention from the regulator.
In a Facebook chat, he said he regularly deleted "unhelpful" posts and warned about scammers but did not believe members of his group could influence stock prices since they were "too stupid to do it here" and "the amount of money and co-ordination is too much".
($1 = 1.2840 Australian dollars)