Making Insiders Pay – Moving Towards Fairness In Securities Trading

In any securities trading market, there are always some people who attempt to take advantage of obtaining internal information to trade inside for mercenary gain, though this practice has been considered to be damaging both to the markets and the participants, creating unfairness among investors. As a result, the Law on Securities of Vietnam (the “LOS”) has prohibited insider trading and provided sanctions for deterrence, although many observe that the legislations are quite inadequate.

Our Article thus aims to provide recommendations on aspects that the legislation of the LOS on insider trading is lacking through (i) specifying how insider trading and its sanction mechanism are currently stipulated in Vietnam’s legal framework; (ii) analyzing the issues with overarching phrases such as “major impact”, “greatly affect”, etc and the three-pillar sanction mechanism in Vietnam as well as (iii) comparing to the laws of the United States, Singapore, and Malaysia for remedies.

Correspondingly, our Article shall find that the LOS has failed to define the concept of insider trading, explain terms such as “major impact” as well as consider the person holding insider information. In addition, the heavy reliance on administrative sanctions of Vietnam proves to be an inadequate deterrence of insider trading, and the amendments to the Penal Code, though a welcomed improvement, still nonetheless fall short.

Therefore, our Article also suggested that the authority should make use of the circulation of the draft of amendments to the LOS to make much-needed changes and give effective enforcement to the LOS to resolve the issues discussed herein.

The full PDF version of our Article can be read here.

Keywords: insider trading; Law on Securities; three-pillar sanction mechanism.