SSC’s bite needing to match its growl

National Assembly deputies last week proposed to incorporate the State Securities Commission’s (SSC) price manipulation investigation into the amended Securities Law. The proposals came amid public concern over allegedly extensive and outright price manipulation practices in Vietnam.

“Verifying evidence to disclose price manipulations is out of SSC’s competence. It is actually a shortcoming of the draft law,” said National Assembly Economic Committee vice chairman  Vu Viet Ngoan.

The ongoing National Assembly gathering is expected to vote on the amended draft on November 24 to drive the new law into force next year.

Ho Chi Minh City delegate Tran Du Lich said when handling a price distortion suspicion, the SSC was unauthorised to ask banks for sensitive information such as investors’ cash origins, which made it hard to bring those cases to light.

For this reason, the uncontrolled price distortions have increasingly disturbed the local stock market and seriously damaged investors’ confidence. However, only seven price manipulation cases were disclosed  in the first ten months of the year.

One way people can deflate the price of a security is by placing hundreds of small orders at a significantly lower price than the one at which it has been trading. This gives investors the impression that there is something wrong with the company, so they sell, pushing the prices even lower. Another example of manipulation would be to place simultaneous buy and sell orders through different brokers that cancel each other out but give the perception, that there is increased interest in the security.

Former State Bank governor Cao Sy Kiem said: “The current SSC position is not adequate. The stock market, which is closely tied with the monetary system, is a very sensitive sector. It  is necessary to set independence for the SSC.”

Lawyer Nguyen Hoang Anh from Mayer Brown law firm told VIR that the SSC was unable to access certain information, like the origins of cash flows involved in transactions and accounts. “It is difficult for the agency to conclude that such suspected price manipulations are true.”

At the National Assembly Standing Committee’s session in August, SSC chairman Vu Bang proposed an investigation right for this body. Yet, the proposal has been laid outside the amended Securities Law draft. “Unless SSC’s competence is advanced, the amended law will hardly handle the biggest problems of the stock market,” said Lich.

According to Minister of Finance Vu Van Ninh, the National Assembly intended to hand SSC more rights to deal with price manipulation, including rights to “ask for information of relating phone calls and emails, along with information on bank accounts and transaction data relating to the suspects”.