PROSECUTION OF FLC FORMER CHAIRMAN & SECURITIES MARKET MANIPULATION

On October 28, Mr. Trinh Van Quyet – former Chairman of FLC Group was proposed to be prosecuted for securities market manipulation and property appropriation fraud. The behavior is considered to be a serious violation of investor interests and the transparency of the securities market. Then, what specifically is Mr. Quyet’s securities market manipulation, and how is the sanction according to current law?

Regarding the case of Mr. Trinh Van Quyet being proposed for prosecution securities market manipulation and fraudulent appropriation of assets

On October 28, 2023, the former Chairman of FLC Group was proposed to be prosecuted by the Police Investigation Agency of the Ministry of Public Security (C01) for securities market manipulation gaining VND732 billion and fraudulent appropriation of assets worth more than VND 3,600 billion by falsely increasing charter capital (pursuant to Clause 4, Article 174 of the Criminal Code 2015).

In the same case, 15 people were simultaneously proposed to be prosecuted for securities market manipulation, including employees of FLC Group, Mr. Quyet’s brothers/sisters (2 biological sisters of Mr. Quyet, Ms. Trinh Thi Thuy Nga and Trinh Thi Minh Hue), along with Ms. Huong Tran Kieu Dung, former permanent vice chairwoman of the Board of Directors of FLC Group and many employees of BOS Securities Joint Stock Company.

Specifically, Mr. Trinh Van Quyet directed his two sisters and a number of people to use different securities accounts to continuously make transactions from May 26, 2017 to January 10, 2022, in order to push up the price of FLC shares from VND15,500 to VND24,050/share. The value increase is 64%. By January 10, 2022, Mr. Quyet directed the sale of more than 76.7 million shares, of which 74.8 million FLC shares were matched without information disclosure according to regulations, earning VND 1,689 billion.

Conclusion of the investigation, Mr. Quyet and his accomplices performed securities market manipulation with 5 stock codes AMD, HAI, GAB, FLC, ART, earning illegal profits of VND 723 billion.

It can recognized that, securities market manipulation is becoming more and more common and increasing in sophistication and complexity. Previously on June 28, 2023, Hanoi City Police issued a decision to prosecute the accused and temporarily detained the defendants for “securities market manipulation” at Asia Thai Securities Joint Stock Company. Binh Duong (APS), Asia Pacific Investment Joint Stock Company (API) and IDJ Vietnam Investment Joint Stock Company (IDJ) (commonly known as the “APEC family”).

What behavior is defined as “securities market manipulation”?

According to current Securities Law, “securities market manipulation” is defined as including one, several or all of the following acts:

– Using one or several accounts of oneself or another person, or colluding with another person to continuously buy and sell securities in order to create artificial demand or supply;

– Placing orders to buy and sell the same type of securities within the same trading day or colluding with another person to buy and sell securities without actual transfer of ownership or with the ownership transferred within the group in order to create artificial demand and supply;

– Continuously buying or selling securities with a controlling quantity at the opening or closing time of the market in order to create a new closing or opening price for such type of securities on the market;

– Trading securities by colluding with or persuading another person to continuously place securities purchase and sale orders to remarkably affect the demand, supply and prices of securities, or manipulate securities prices;

– Offering opinions whether directly or via the mass media about a type of securities or securities issuer in order to affect the price of that type of securities after conducting a transaction and holding the position of that type of securities;

– Using other methods or committing other trading acts, with or without providing false information, to create artificial demand and supply or manipulate securities prices.

Securities market manipulation can be subject to administrative sanctions

Subjects who commit violations of securities market manipulation may be subject to administrative sanctions in the following forms:

Imposing a fine equal to 10 times the illegal revenue, but not lower than the maximum prescribed fine, equivalent to VND 3 billion for organizations; and VND 1.5 billion for individuals. In case there is no illegal revenue or the fine calculated based on the illegal revenue is lower than the above maximum fine, this maximum fine will be applied for punishment.

Regarding additional sanctions, the subject may be suspended from securities business and service activities for a period of time from 01 month to 03 months for securities companies, securities investment fund management companies, Branches of foreign securities companies or fund management companies in Vietnam commit violations; Revocation of the right to use securities practice certificates for a period of 18 months to 24 months for securities practitioners who commit violations.

Remedial measures, including forcing the return of illegal proceeds obtained from violations.

Violations of trading regulations leading to securities market manipulation can also be punished.

Specifically, subjects who lend their accounts to others to trade securities or own securities in their names for others, leading to acts of stock market manipulation, may have their securities trading activities suspended for a limited period from 6 months to 12 months.

>> STOCK MARKET MANIPULATION, HOW IS THE SANCTION? https://linconlaw.vn/stock-market-manipulation-how-is-the-sanction/

>> INFORMATION DISCLOSURE BY INTERNAL ACTORS https://linconlaw.vn/information-disclosure-by-internal-actors/

Securities market manipulation can be subject to criminal prosecution

According to regulations, people who perform the violation of securities market manipulation can be prosecuted for criminal liability with the following penalties:

For violators as individuals

Offenders can be sentenced to imprisonment from 06 months to 07 years; or fine from VND 500 million to VND 2 billion. Offenders may also be fined from VND 50 million to VND 250 million, banned from holding certain positions, practicing certain occupations or doing certain jobs for 01 to 05 years.

For violators as legal entities

Commercial legal entities committing crimes may be fined from VND 2 billion to VND 10 billion; suspended operations permanently. In addition, legal entities may also be fined from VND 500 million to VND 2 billion, banned from doing business, banned from operating in certain fields from 01 year to 03 years or banned from raising capital from 01 year. up to 03 years.

It can be recognized that, the violations that occur have a significant negative impact on the interests of investors and the entire stock market in general, as this is currently an attractive capital mobilization and investment channel. In addition to the attitude of disregarding the law and placing illegal benefits above the risk of legal liability of criminal subjects, is it necessary to frankly acknowledge the loopholes still existing in the provisions of law related to transaction setup and management; mechanism for inspection and control of violations as well as the level of deterrence of current sanctions?