Market violation cases on the rise despite fines

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Although the current Securities Law includes severe penalties, the number of stock price manipulation cases is increasing, causing great damage to the market and frustration for investors.

An investor walks past a board showing stock indices. If stock manipulation activities are not detected early, the illegal profits of the violators will become very large. — VNA/VNS Photo

Although the current Securities Law includes severe penalties, the number of stock price manipulation cases is increasing, causing great damage to the market and frustration for investors.

According to Nguyen Hoang Hai, Vice Chairman of the Viet Nam Association of Financial Investors (VAFI), the recent case of FLC Group’s Chairman Trinh Van Quyet arrested for alleged stock manipulation is just one among numerous other violations in the stock market.

“The key problem was that the current management and supervision of the market regulators, as well as the State Securities Commission, has not been effective enough,” Hai told Viet Nam News Agency.

Many countries around the world have a model of a securities commission, whose leaders came from different units within the State agencies. The commission had independent leaders such as the chairman, secretary-general, and permanent members, Hai said.

“However, the current model of Viet Nam’s State Securities Commission is a single-leader model, so decisions on personnel, inspection, supervision, and licensing are made by only one leader. Unlike the other models around the world now, licensing and post-testing processes are made by two different leaders. In my opinion, it is necessary to have reforms at the Viet Nam State Securities Commission,” said Hai.

According to the new Securities Law, the supervision over the stock market has covered three levels, from securities companies, the Stock Exchange to the State Securities Commission.

A representative of the State Securities Commission said that this supervision was a regular and continuous practice, so signs of abnormal trading of stocks were monitored very closely.

The State Securities Commission would conduct unexpected inspections when detecting signs of law violations by organisations and individuals, especially signs of market manipulation, he said.

Stocks with unusual trading movements were always closely supervised by many agencies, across many levels. If detecting signs of violations, the commission would conduct or co-ordinate with functional agencies to inspect and handle violations according to the law, he said.

Previous sentences

If stock manipulation activities are not detected early, the illegal profits of the violators will become very large.

Although the authorities have detected and handled many violations on information disclosure on the market, most of them were just administrative sanctions. Since most of the fines are small amounts, many large shareholders are willing to trade off fines for profits.

Just a few cases have been brought to criminal trial.

At the beginning of 2022, the Investigation Police Agency under the Ministry of Public Security was investigating acts of creating fake supply and demand, manipulating the share prices of SANA WMT Joint Stock Company, now named ASA Joint Stock Company (ASA).

Based on the results of the investigation, it was found that Nguyen Van Nam, former Director of ASA Joint Stock Company, had created fake documents to falsely increase 7 million ASA shares, equivalent to VND70 billion (US$3 million), listing 7 million shares of ASA on the Ha Noi Stock Exchange (HNX) for sale and illegally collected money.

The investigative police agency then issued a decision to prosecute a criminal case, arrest Nam and accused him for the charge of fraud and appropriation of property.

Previously in August 2020, the Ha Noi People’s Court heard the case of fraud to appropriate property and manipulate CDO stock prices by defendant Nguyen Van Giang, born in 1981, former Director of Dong A Bank Securities Co, Ha Noi branch.

Defendant Giang directed some employees to open 70 different accounts at 24 securities companies. The defendant directly used these accounts to apply margin trading, guarantee late payment, or borrow money from other individuals to get money to buy and sell CDO shares to create liquidity and push up the share prices of CDO.

As a result, 572 investors suffered losses of VND11.2 billion, in which 33 investors claim damages amounting to VND1.8 billion.

The Ha Noi People’s Court sentenced defendant Nguyen Van Giang to 17 years in prison for fraud to appropriate property and 3 years in prison for manipulating securities prices.

In May 2020, the Ha Noi People’s Court also opened a first-instance trial of the case of stock market manipulation that occurred at Binh Thuan Mineral and Industry Joint Stock Company (KSA).

In this case, a number of defendants were sentenced to prison. The court sentenced Pham Thi Hinh, born in 1975, former Chairman of the Board of Directors of KSA, to 18 months in prison.

Three defendants, Nguyen Anh Tuan, born in 1981, residing in Vinh Tuy ward, Hai Ba Trung district, Ha Noi; Tran Hong Ngoc, born in 1981, residing in Ngo Thi Nham ward, Hai Ba Trung district; and Nguyen Trong Hung, born in 1979, residing in Hang Bong ward, Hoan Kiem district, also received suspended 15-month sentences, with probation time of 30 months for the same crime of manipulating the stock market.

Previously, on May 7, 2019, the Ha Noi People’s Court opened the first-instance trial of the case of manipulating securities prices, fraudulently appropriating assets, by defendant Tran Huu Tiep, former Chairman of the Board of Directors of the Central Mining and Mineral Import Export Joint Stock Company (MTM) and 14 accomplices.

This is the first case brought to trial by the Ha Noi People’s Court on the act of manipulating securities prices.

The court sentenced defendant Tran Huu Tiep to life imprisonment for the crime of “fraudulent appropriation of property”. For the same crime, two defendants Vu Thi Hoa and Nguyen Le Truong received 12 years in prison. Bui Thien Ly and Do Huu Tai were both sentenced to 30-month suspended sentences by the Court, with a probation period of 5 years.

Source: VNS

FLC’s finance report showed that as of December 31, 2021, FLC’s short-term loans and finance leasing value had reached 2 trillion, while long-term loans and finance leasing value was VND4.1 trillion.

Violations by the 2015-2020 State Securities Commission (SSC) Party Committee and its officials were found to have significant implications,

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