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I am researching this as a part of a story plot involving hundreds to thousands of people who are members of a religious organization and who have agreed to buy and sell a particular company's shares in an attempt to create upward / downward momentum and to profit from the changes.

In the USA, are there laws that would make this illegal? If so, what laws are they?

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  • Pretty sure all you'd manage to do is shuffle money back and forth, at least til it all gets eaten up in SEC fees and such. (In order to play this game, you'd need a stock where your purchases and sales could have a noticeable impact, which would be a stock where existing demand is relatively low.)
    – cHao
    Jan 29, 2018 at 19:11
  • In a pump and dump scheme, the perps take their positions in small float stocks and then push price up with false or exaggerated statements in cold calls. As the buying ebbs, the schemers dump their shares at higher prices, leaving a lot of bag holders in their wake. The difference between P&D and the OP's scenario is that the P&D involves other (gullible) buyers. A "religious group" buying and selling the stock would effectively amount to shuffling money around because late buyers from the group would rack up losses as the early buyers sold and share price dropped.
    – Bob Baerker
    Jan 29, 2018 at 19:35
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    @BobBaerker, OP did not say how that organization would execute their scheme. Maybe it's intended to be some scaled up version of the scenario in this other question: money.stackexchange.com/questions/90179/…
    – user100487
    Jan 31, 2018 at 3:20
  • The OP did not say how that organization would execute their scheme because he's in the process of writing a story, probably fiction but based on the reality of the market - hence the question he posed. I'm not going to speculate on what he intended or whether it links to another question posed on SE. All I can do is explain how the market works and why that makes his premise flawed.
    – Bob Baerker
    Jan 31, 2018 at 4:53

1 Answer 1

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Yes, this is prohibited by the Securities Exchange Act of 1934, Section 9(a)(2).

SEC. 9. (a) It shall be unlawful for any person, directly or indirectly, by the use of the mails or any means or instrumentality of interstate commerce, or of any facility of any national securities exchange, or for any member of a national securities exchange—

(2) To effect, alone or with 1 or more other persons, a series of transactions in any security other than a government security, any security not so registered, or in connection with any security-based swap or security-based swap agreement with respect to such security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.

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    Yes, and pump-and-dumping stocks is illegal. Hard to prove intent and prosecute, but still illegal.
    – Magua
    Jan 29, 2018 at 19:27
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    Or in other words, it's not illegal to trade in a group, but it is illegal to try to manipulate prices?
    – user253751
    Jan 30, 2018 at 2:05
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    Hmm, the only reason to trade in a group is to (try to) manipulate prices. State, any other reason to trade in a group. Like - for dating reasons? The feelgood factor? The only reason to trade in a group is to (try to) manipulate prices.
    – Fattie
    Jan 30, 2018 at 2:19
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    @Fattie. what if the groups "reason" for trading together is simply to make money (for themselves or for someone else)? I mean if their purchases or sales of a stock has an effect on the price, where does it become "manipulation". I mean this because everyone else's purchases or sales have an effect on it as well (although it is minuscule unless the individual investor is able to buy huge amounts). Other than that perhaps their reason for buying or selling could be something like "to support causes they care about"(?)
    – user25276
    Jan 30, 2018 at 14:18
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    it's a reasonable point that another reason could be "support causes" (good one for thinking about that). but the overwhelming answer to the QA at hand is just "yeah that's manipulation". the whole "market-government complex" is set up and operated a certain way to have certain winners (guess who). they have far more guns than any other party, so that's the end of it.
    – Fattie
    Jan 30, 2018 at 14:26

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