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The Police Investigation Agency under the Ministry of Public Security says that existing loopholes in the legal regulations on securities activities allow criminals to take advantage to commit crimes |
The Police Investigation Agency said that existing loopholes in the legal regulations on securities activities allow criminals to take advantage to commit crimes.
The Police Investigation Agency under the Ministry of Public Security has just completed the conclusion of the investigation of the case of ‘Stock market manipulation’ and ‘Fraudulent appropriation of assets’ at FLC Group Company and its affiliated units. At the same time, it transferred the dossiers to responsible agencies requesting the prosecution of 21 defendants. Based on the causes and conditions of the crime, the investigation agency recommended that many relevant agencies and organizations apply preventive measures.
During the investigation process, the Police Investigation Agency found that there were loopholes and shortcomings in the legal regulations on securities activities, allowing criminals to take advantage to commit crimes.
According to police investigators, opening securities accounts is currently easy and uncontrolled, criminals have been asking others to open accounts to buy and sell shares, creating fake supply and demand, and pushing prices up to earn illegal profits.
In addition, police investigators said that the control of borrowing capital in the form of investment cooperation still has many loopholes. Criminals have taken advantage of securities companies and third companies to circumvent the law and sign loan contracts for customers in the form of investment cooperation to contribute other capital with a fixed interest rate to earn profits; thereby, criminals have sources of money to trade, buy and sell, push prices, manipulate stock codes, and gain illegal profits.
The Police Investigation Agency revealed that the crime of ‘Manipulation in stock market " is very sophisticated and many people got involved in causing a great impact on the market and causing great loss for investors.
However, under the current Penal Code, the penalty for this type of crime is still low. For instance, criminals pay VND4 billion as the highest fine and they can face 7 years in prison - the maximum prison sentence. The maximum investigation period is 8 months while maximum detention period for investigation is 5 months, causing difficulties for investigators. Moreover, slight penalties are not tough enough to deter people from committing crimes.
Police investigators also revealed that the lack of control over the activities of social networks allows bad guys to take advantage of it to establish secret associations and groups to spread fake news, control and manipulate the stock market, and gain illegal profits, causing losses to genuine investors.
Currently, there are no regulations as a legal basis for determining damages for investors participating in buying and selling stock codes during periods of manipulation to have a basis for verifying their losses.
Additionally, the Police Investigation Agency of the Ministry of Public Security proposed that the Ministry of Planning and Investment advise the Government to prevent many businesses from taking advantage of legal loopholes and using sophisticated tricks using accounting and financial tricks.
A business can increase its capital without shareholders’ additional amount, in order to falsely increase its charter capital to commit illegal acts and gain illegal profits such as fraud, manipulation of bidding activities, auctions, and manipulation of the stock market causing damage to state assets, businesses, and investors.
Thus, to prevent virtual capital increases, the Police Investigation Agency supposed that inspection and supervision of activities related to the charter capital of enterprises is necessarily strengthened. In particular, the agency said that the government should amend and supplement legal regulations to prohibit businesses from entrusting investment with corporate capital to individuals who are corporate shareholders.
At the same time, the government should specify and clearly stipulate the time limit for returning capital to shareholders in cases where the enterprise increases capital; plus, the government should stipulate responsibilities and mechanisms for inspection of organizations and individuals that conduct supervision related to enterprise charter capital to eliminate collusion, intentional ignorance, and cover-up by a responsible part of state management agencies.
The Police Investigation Agency requested the State Securities Commission to strengthen supervision of the stock market with a focus on trading stock codes with signs of strong price fluctuations reaching monitoring criteria due to stock exchanges transferring weak production and business activities of enterprises or turning losses into profits.
The Police Investigation Agency also requested the Ministry of Finance to regularly exchange information with the Ministry of Public Security’s professional departments on developments in the financial, currency and stock markets; registration, listing, investment issuance, and stock trading activities.
