Proposal to enhance regulation of market manipulation in stocks

Two investors watch the market’s movements on a trading floor at a securities firm in Hà Nội. — Photo tuoitre.vn

HÀ NỘI — The Ministry of Finance (MoF) is suggesting revisions and additions to specific sections of the 2019 Securities Law, with a focus on tightening market manipulation practices.

After conducting inspection and transaction audits, the MoF emphasised the importance of amending and supplementing regulations on market manipulation in Decree 156 to align with current market realities.

Behaviours, include dominating buy or sell volumes of securities at market open or close, to influence closing or opening prices for that security, placing buy and sell orders for the same securities on the same trading day or coordinating trades without actual transfers, are seen as market manipulation practices.

The ministry also notes the absence of strict regulations prohibiting insiders of public companies, public securities investment firms, public funds and their affiliates from withholding information on anticipated transactions. This oversight complicates the handling and prevention of market infractions.

As a result, it proposes a ban on such practices within the securities sector.

In addition, the MoF’s proposal introduces significant points concerning the responsibilities of relevant entities and individuals regarding documentation, reporting, professional securities investors and securities offerings.

The draft regulations for professional retail investors propose additional requirements, including a minimum two-year tenure in securities investment, a minimum of ten trades per quarter over the past four quarters, and a minimum annual income of VNĐ1 billion (US$40,217) over the past two years.

Previously, the Securities Law of 2019 and Decree 65 raised the bar for professional investor qualifications.

However, meeting these standards does not guarantee the ability to assess bond risks, as the regulation currently focuses solely on capital requirements, necessitating individuals to maintain a portfolio value averaging at least VNĐ2 billion over 180 days, excluding borrowed funds.

As per the MoF, fundamentally, the private placement bond market is a specialised arena with heightened risks.

Participation in this domain should be limited to a few investors possessing robust financial strength, professional expertise and being able to identify and embrace risks.

Nevertheless, recently, the operation of the private placement bond market in Việt Nam has not been in line with its inherent nature.

It is evident that numerous bond offerings are dispersed among thousands of retail investors, mainly comprising small-scale retail investors (either directly or indirectly holding bonds through investment collaboration agreements or repurchase contracts).

These investors typically exhibit low investment values, lack substantial experience and expertise, while struggling with risk assessment capabilities.

The MoF also proposes new measures for upgrading the securities market, including allowing clearing members like securities firms, commercial banks and foreign bank branches to handle transactions in both primary and derivative markets.

The ministry recommended further research and regulation adjustments to establish subsidiary companies under the Việt Nam Securities Depository and Clearing Corporation (VSDC) for implementing the central counterparty (CCP) mechanism, aiming for efficiency and international compliance.

These steps are crucial for addressing the pre-funding issue, a current bottleneck in the upgrading process. — VNS