The maximum penalty for securities violations will be held at the current level VND500 million (US$24,000) under the latest version of the Law on Administrative Violations approved by the National Assembly and taking effect in July of next year.
The low ceiling level is being viewed by experts as a setback to market development since it is certain to reduce the deterrent effect of administrative measures.
Tran Minh Hai, director of the BASICO Law Firm, said this penalty level was set 10 years ago and has already shown its limitations in dealing with violations on the stock market. Hai said that deterring securities violations required fines at least large enough to erase the gains from the violation.
In contrast to the somewhat toothless level of fines in the securities field, the Ministry of Justice was currently drafting a joint circular under the Criminal Code that would set fines in the areas of taxation and auditing and accounting that are likely to take a much higher baseline than VND500 million, he added.
However, he noted, global experience has shown that securities violations are better handled through substantial administrative fines and that criminalising securities violations should be avoided as likely to cause negative impacts on market development.
In the process of drafting the Law on Administrative Violations, the drafting agencies suggested increasing administrative fines on securities violations to VND2 billion ($95,200), four times the current level. However, faced with the argument that higher penalties would further deter growth of a stock market that is already struggling against poor economic conditions, the National Assembly voted to retain the current level of fines.
While the current amount is seen as too weak to prevent violations, market insiders have suggested that the State Securites Commision impose additional penalties to increase the disincentive to violations, including revocation of business licences and professional certificates, or suspension of violators’ operations for a period of time.