Internal Transactions Are Not Good for Stock Investors

On the stock market, investors always desire what is called "good news" such as the price of this stock is about to rise, or that stock is about to fall in order to make a profit or minimize risk. Those with expertise consider and analyze the factors available on the market to create "good news" for themselves. Those without sufficient knowledge just "wait for luck."

This is the cause of the phenomenon where internal shareholders or large shareholders use insider information for illicit gains, also known as insider trading. In reality, many people have used insider information to make billions of dong. For instance, Ms. Nguyen Thi Van Trang, an officer in the Financial Department of Vinaconex Xuan Mai Concrete and Construction Joint Stock Company (XMC), engaged in insider trading with XMC stocks.

However, for those slower to act, receiving information that is outdated may result in losses. Consequently, insider trading has taken away fairness and has often caused the stock market to fluctuate. So how does Vietnamese law handle this economically serious misconduct?

Article 181b of the Criminal Code amended in 2009 stipulates:

1. Any person who intentionally discloses false information or conceals the truth regarding offering, listing, trading, securities business activities, market organization, registration, depository, clearing, or payment of securities, causing serious consequences, shall be fined from one hundred million dong to five hundred million dong, subjected to non-custodial reform for up to two years, or imprisoned for six months to two years.
2. Committing the crime in any of the following circumstances shall be punished by imprisonment for one to five years:

​Organized;

Large illicit profits;

Causing very serious or particularly serious consequences;

Dangerous recidivism.3. The offender may also be fined from ten million dong to one hundred fifty million dong, prohibited from holding certain positions, practicing certain professions, or doing certain jobs for one to five years.

The issue is that this type of violation is very difficult to investigate. This difficulty arises from the inability to gather information about bank accounts and transactions, lack of access to telephone, email correspondence. As the 2013 Constitution recognizes, everyone has the right to inviolability of private life, personal and family secrets; confidentiality of correspondence, telephone, and other private means of communication. Hence, most violations in this area are only administratively sanctioned.

To be specific, according to Article 26 of Decree 85/2010/ND-CP on administrative sanctions in the field of securities and the securities market, a fine ranging from 150,000,000 to 200,000,000 dong shall be imposed on individuals or organizations committing one of the following violations:

- Using insider information to trade securities for oneself or a third party;- Disclosing, providing insider information, or advising a third party to trade securities based on insider information.

Additionally, individuals or organizations in violation shall be subject to the confiscation of all illegal gains obtained from insider trading in the securities transactions.

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