29 Dec



Section 71. This provision relates to secondary market dealings in Company’s security.

The Stock Exchange is a market where sellers of shares meet with buyers of shares. The price at which shares are traded on the market are determined basically by the forces of demand and supply. They should not be manipulated by other fraudulent and artificial means[1].

Section 109-111 of ISA is instructive on this.

In ensuring a level playing field, Section 109 prohibits dissemination of false information, manipulative tendencies. Section 110 on its part prohibits artificial and deceptive transactions. Note Section 107 which prohibits false information that can affect the forces of supply. Section 108 also prohibits the dissemination of misrepresentation/misleading statements.

Insider Dealings: Section 111 provides; (1) Subject to Section 104 of this Act, a person who is an insider of a company shall not buy or sell, or otherwise deal in the securities of the company which are offered to the public for sale or subscription if he has information which he knows is unpublished price sensitive information in relation to those securities. This provision also extends to those that are not insiders- Section 315 but have gotten information from the insider.

This is to prevent him from having undue advantages over other members of the public. Remember that the law seeks to create a level playing field. Section 112 deals with official insiders. Note however that certain exceptions are contained under Section 113. Sanctions are imposed under Section 115 and 116.

In conclusion, Section 13 ISA charges the ISC to regulate and ensure the integrity and principle of fairness in the Securities Market. Section 106(5) too.


[1] This requirement is predicated on the “Fool’s Theory”. This theory presumes that everybody in the Stock Market is a fool. E.g. the seller would say; only a fool would buy this my shares that I am abandoning. While the buyer would say; only a fool would sell his shares (which is an investment) to me. The reason for this is that the buyer and seller have information (which may be based on Historical, Present and Speculative Information) which is only known to them. This results in the “Random Walk” doctrine which means that the prices/value of shares fluctuate from individual to individual based on information available to them. Thereby resulting in an unevenly distributed information. What the law then tries to do is to create a level playing ground.


Quite eccentric really

Leave a Reply

%d bloggers like this: