SECURITIES MARKET MANIPULATION, WHAT ARE SANCTIONS

Securities are a channel to mobilize capital as well as an attractive investment channel. However, with the huge profits that can be gained, many people are willing to commit illegal acts with increasingly sophisticated tricks. Among them, securities market manipulation is a common violation. With serious impacts on market transparency and violation of investor interests, what are the sanctions for securities market manipulation?

1. What is “securities market manipulation”?

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

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.

Some actual cases related to violations of securities market manipulation can be mentioned as follows:

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”).

On October 28, 2023, the former Chairman of FLC Group was proposed to be prosecuted for securities market manipulation gaining VND732 billion and fraudulent appropriation of assets worth more than VND 3,600 billion by falsely increasing charter capital.

2. Administrative sanctions for securities market manipulation

Pursuant to Decree 156/2020/ND-CP, amended and supplemented by Decree 128/2021/ND-CP, administrative sanctions depending on the specific behavior and level of violation are as follows:

a. Violations of securities market manipulation:

– Fine:

Fine applied 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.

– Additional penalties:

Subjects 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 securities companies or public companies, Foreign fund management companies in Vietnam have committed 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:

Subjects may be required to return illegal proceeds obtained as a result of violations.

b. Violation on trading regulations leading to securities market manipulation

Subjects who lend their accounts to others to trade securities or own securities in their names for others, leading to acts of securities market manipulation, may be suspended from securities trading activities for a period of 06 to 12 months.

>> PROSECUTION OF FLC FORMER CHAIRMAN & SECURITIES MARKET MANIPULATION https://linconlaw.vn/prosecution-of-flc-former-chairman-securities-market-manipulation/

>> IN WHICH CASE CAN WITHDRAWAL OF FOOD SAFETY CERTIFICATE OCCUR? https://linconlaw.vn/in-which-case-can-withdrawal-of-food-safety-certificate-occur/

3. Investigation on criminal liability for securities market manipulation

Pursuant to the provisions of the Criminal Code 2015, people who commit acts of securities market manipulation may be prosecuted for criminal liability with the following penalties:

a. For violator as individual:

(i). Anyone who commits one of the following acts to gain illegal profits from 500 million VND to under 1.5 billion VND or causes damage to investors from 1 billion VND to under 3 billion VND will be fined from VND 500 million to VND 2 billion or imprisonment from 06 months to 03 years:

– Using one or multiple accounts of the offender or another person or colluding with another person, to continuously buying and selling securities in order to create false demand and supply;

– Colluding with another person to place orders for purchase and sale of the same type of securities within the day or selling and buying securities without actual transfer of ownership or ownership is only transferred within the group in order to create false 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 price or opening price for such type of securities on the market;

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

– Offer opinions whether directly or via the media about a type of securities or securities issuer in order to affect the price of that type of securities after a transaction has been made in order to have an advantage from it.

– Using other methods or commit other acts to create false demand and supply in order to manipulate securities prices.

(ii). Committing a crime in one of the following cases shall be fined from VND 02 billion to VND 04 billion or imprisoned from 02 to 07 years:

– The offence is committed by an organized group;

– The illegal profit reaped is from 1,5 billion;

– Causing damage to investors from VND 3 billion;

– Dangerous recidivism.

(iii). Offenders may also be fined from VND 50 million to VND 250 million, banned from holding positions, practicing certain occupations or doing certain jobs for 01 to 05 years.

b. For violator as organization:

– Committing a crime in the case specified in item (i) above, shall be fined from VND 2 billion to VND 5 billion;

– Committing a crime in the case specified in section (ii) above, shall be fined from VND 5 billion to VND 10 billion;

– Committing a crime under prescribed circumstances can result in permanent suspension of operations.

In addition, commercial legal entities violating stock market manipulation may also be fined from 500 million VND to 02 billion VND, banned from doing business, and banned from operating in certain fields from 01 year to 03 years or prohibitted on capital mobilization from 01 year to 03 years.