Regulations tighten on short selling
Regulations tighten on short selling
The State Securities Commission will increase surveillance of and penalties for illegal short selling after a recent rise in such activities led to the arrests of some local stockbrokers.
Brokerages are forbidden from providing short selling services to clients – the selling of a security that the seller does not yet own – but it is widely known that many companies have offered this serivce "behind the scenes".
Commission chairman Vu Bang told local media that further violations would be fined severely and any securities companies violating the regulation would see their brokerage operations suspended for up to two months. Individual brokers who committed these acts would have their professional certificates revoked, he said.
"In some cases, some short selling acts might be classified as market destruction and could be sent to police agencies for prosecution," Bang warned.
The arrest of the former head of the brokerage department at Vien Dong (Far East) Securities Co, Phan Thien Hau, along with the recent detection of short selling at HCM City Securities Co and Dai Nam Securities Co, have raised the alarm about an upswing in this phenomenon on the stock market.
The commission recently hit two HCM City Securities Co brokers with fines of VND85 million (US$4,000) each for lending securities to clients on the accounts of other clients. The company itself was sanctioned VND105 million ($5,000) for not effectively supervising the performance of its employees.
Current sanctions were not strong enough to deter violations, so the commission was amending the decree on sanctioning administrative violations on the securities market, including increasing penalties, Bang said.
"The act of short selling has become increasingly sophisticated and complex and is difficult to detect," he said. "The buying or selling has been made on the account of brokers and the Viet Nam Securities Depository Centre has not detected it."
Basico Law Firm managing director Tran Minh Hai has encouraged investors to improve their knowledge of the law when using derivatives contracts since this area of the market was still subject to an insufficient legal framework.
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