Market manipulation involves the unwarranted interference in the operation of demand and supply for securities in a stock market. 

Interference in the market may be achieved where manipulators disseminate misleading or false information about an issuer or its securities or through artificial transactions intended to convey false information regarding the forces of demand and supply for the market or price of securities.

The offence of market manipulation was introduced into the laws of Sri Lanka for the first time through the Securities and Exchange Commission of Sri Lanka Rules, 2001 (Gazette Extraordinary No. 1215/2 of 18 December 2001) (“SEC Rules”) issued under the Securities and Exchange Commission of Sri Lanka Act, No. 36 of 1987 (as amended). Rule 12 of the said rules reads “No person shall create, cause to be created or do anything that is calculated to create a false or misleading appearance or impression of active trading, or a false or misleading appearance or impression with respect to the market for or the price of any securities listed in a licensed stock exchange”.

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