Proposal to tighten penalties for securities violations

Proposal to tighten penalties for securities violations

The Ministry of Finance has proposed tightening discipline in the stock market with stringent measures, significantly increasing fines for violations related to private offerings, margin trading, and misconduct by licensed professionals to protect investors and mitigate systemic risks.

In an effort to enhance the integrity of Vietnam's securities market, the Ministry of Finance (MoF) has introduced a draft decree proposing amendments to existing regulations, notably Decree No.156/2020/ND-CP and its subsequent amendment, Decree No.128/2021/ND-CP. These proposed changes aim to address emerging challenges and bolster investor confidence.​

Decree 156, effective from January 2021, outlined administrative violations, penalties, and remedial measures within the securities sector. It serves as a foundational framework for maintaining market discipline and transparency. ​

Recognising the need for continual improvement, Decree 128 was enacted at the end of 2021 to amend and supplement Decree 156. This introduced stricter penalties for violations such as failing to open frozen accounts for stock payments and using proceeds before official approval, with fines ranging between $4,000 and $8,000.

The most recent draft suggested separating violations related to corporate bonds into a distinct category. Specifically, monetary penalties will be increased for violations that could impact the operations of securities businesses or investor rights, such as private offerings, margin trading, and misconduct by licensed securities professionals.

Stricter penalties will also apply to violations related to securities business licences, activities requiring regulatory approval, and services that must be reported before execution. The aim is to enhance compliance and ensure securities firms and fund management companies operate under the State Securities Commission’s (SSC) oversight.

The draft proposes fines ranging from $80,000 to $100,000 for falsifying documents or submitting forged certifications in registration dossiers for the offering and issuance of shares, convertible bonds, and bonds with warrants.

Misrepresentations or omissions in these registration dossiers could result in fines between $20,000 and $24,000.

Fines of $2,000 to 2,800 will apply to early bond buybacks or swaps conducted without prior approval or in deviation from the approved plan. Unauthorised or untimely share and bond offerings, as well as failure to disclose audited reports on the use of funds raised, may lead to penalties between $2,800 and $4,000.

Furthermore, failure to amend or supplement offering registration dossiers upon discovering inaccurate or missing information will be subject to fines of $4,000 to $6,000. Conducting offerings or issuances that deviate from the approved plan or the registered details with the SSC could also incur financial penalties.

Companies altering the approved use of capital raised without shareholder or board approval may face fines ranging from $8,000 to $12,000.

According to the MoF, the draft decree maintains stable and tested provisions from Decree 156, as amended by Decree 128, while introducing targeted revisions to align regulations, address inconsistencies, and resolve practical challenges in enforcing administrative sanctions in the securities market.

VIR