Commission draws flack for being soft on market violators

There is growing public concern that punishments for violating securities laws are too lax, which only encourages more people to break the rules.

Though the State Securities Commission (SSC) has indicated all violators would face harsh repercussions, the number and types of regulatory infringements continues to rise.

Since the beginning of the year, the HCM City Securities Trading Centre (HoSTC) has issued warnings to securities companies and suspended brokers for mismanaging orders. The companies include Hai Phong Securities, Au Lac Securities, Gia Anh Securities, Thang Long Securities and HCM City Securities.

The SSC recently ordered six brokerages, including Pacific Securities and VPBank Securities, to close employees’ secondary accounts. Regulations state that brokers are allowed to open only one account with their company of employment.

It is not only small securities firms that have violated regulations.

Indochina Capital was fined VND10 million for trading VNM shares internally without reporting the activity to authorities, while HoSTC officials have warned Citigroup Global for not reporting its acquisition of 5.48 per cent of NKD shares.

Sai Gon Securities Inc had to pay a VND10 million fine after raising its charter capital three times last year from VND52 billion to VND500 billion without reporting to the commission in time.

There were also cases with senior executives at listed companies silently trading shares without properly notifying authorities.

In mid-June, Tran Le Viet Hung, a board member of Bibica JSC (BBC), and Luu Tan Khoa, supervisor of Ry Ninh II Hydropower JSC (RHC), traded BBC and RHC shares on the HCM City exchange, but did not tell authorities and executives at their respective companies.

The HoSTC did not punish either of the executives, but issued a warning to properly comply with regulations regarding public disclosure in future.

Bui Ngoc Tuoc, a freelance securities analyst, says most securities violations are intentional and were discovered only after the SSC and HoSTC carried out investigations.

The two executives who financially gained from silently swapping shares, for example, knew the regulations clearly but were not afraid since they knew punishment would be light, says Tuoc.

On June 28, the SSC announced it had imposed a VND30 million fine on Nguyen Diem Phuong Khanh, an investor in HCM City, after she colluded with her brokerage to create artificial demand for a stock, which pushed share prices higher.

"This was good news as it was the first time an attempt to distort prices was discovered," says HoSTC Deputy Director Le Hai Tra. "The punishment was rather light though, but we cannot act beyond the scope of regulations."

Some brokerages are upset with how authorities have handled cases since soft punishments only hurt securities companies that comply with regulations.

SSC Director Vu Bang says the commission has submitted a plan to the Government to establish a regulatory enforcement board, which will co-operate with securities trading centres on market oversight.

The board’s two main functions will be to search for market manipulating practices and oversee the bourses’ information systems.

Source: VNS