Watchdog sniffs out illegal traders

illustration photo

“We [SSC] will enhance inspections and apply stronger punishments in the case of violations,” said chairman for SSC, Vu Bang.

SSC said it was in a hurry to complete a circular calculating the amount of illegal money that investors gain from their trade. The circular had been basically accepted by the Ministry of Finance and was expected to be released, Bang indicated.

A joint circular between Ministry of Finance and Ministry of Public Security to concretise which violations could be seen as criminal offences was being drafted, said the chairman.

According to Bang, these movements are part of the SSC’s effort to deal with the violations that are occurring regularly within the local securities market, and the watchdog sees as the site of its hardest work over the past year.

“Inspections and fines were the biggest headache for us in 2010. It took up the greatest portion of time as well as human resources to deal just with the violations,” said Bang.

Vietnam’s stock market has been witnessing an increasing number of violations. Several companies violated listing regulations such as information disclosure and share issues, while brokerage firms rushed to provide their clients with risky services which exceed legal boundaries. Investors were frequently involved in manipulating stock prices for their own benefit.

Among these kinds of violations, price manipulation is said to have increased the most over the past year. In some cases, people have seen obvious signs of price manipulation – for instance, a plastic company stock doubled in price in just over a month directly after its major shareholders registered to sell their holdings, before plunging to below the initial price once those shareholders finished their trade – yet no official conclusions have been released by the watchdog.

The official statistics from the SSC show 17 cases of manipulation with nine insider trades in 2010. However, according to a source familiar with the matter, the “unusual” trades could be some tenfold higher.

Bang said the nature of the violations was increasingly sophisticated and, as such, the current legal system was still ill-equipped to deal with them.

“The level of manipulation by investors and securities companies is increasingly high, generating brand new circumstances that we do not have any legal basis from which to handle them,” he said.

Meanwhile, the current penalties - mainly cash fines - are believed to be too weak to curb the increasing wrongdoings on stock market.

SSC said it would sharply increase the level of the fines, along with cooperating with the Ministry of Public Security to criminalise some violations in the securities sector in order to make punishments more severe.

The end of 2010 saw the Vien Dong Pharma Joint Stock Company (DVD) stock price manipulation case emerging as the first case in which insider traders were seized and received criminal prosecution. The case is expected to be the signal gunshot of the watchdog for stronger and more effective efforts to clean up the local securities market.

“We are determined to severely punish the main culprits in order to send a strong warning to others,” said Bang.