Topic theoretical and practical basis of the state securities commission’s additional authority to investigate violation in the stock market

The nature of the right to investigate violations of the State Securities Commission of Vietnam when performing the function of state management of Securities and the securities market i

HO CHI MINH UNIVERSITY OF BANKING FACULTY OF ECONOMIC LAW

SUBJECT: SECURITIES LAW

TOPIC: THEORETICAL AND PRACTICAL BASIS OF THE STATE SECURITIES COMMISSION’S ADDITIONAL AUTHORITY TO INVESTIGATE VIOLATION IN THE STOCK MARKET

Professor: PGS.TS Vien The Giang

Group: 8

Ho Chi Minh city, 24'" December 2023

Contents

OPENING STATEMENT LH HT HH kh 3

2 The nature of the right to investigate violations of the State Securities

Commission of Vietnam when performing the function of state management of Securities and the securities market in Viefnam - nh hy 4 2.1 Vietnam State Securities C€CommiSSÌOn - - c c Ăn ca 4 2.2 Right to investigate violations of the State Securities Commission of Vietnam regarding securities and securities market in Vietnam 4

3 Distinguish between the right to investigate/investigate violations in state management of the State Securities Commission of Vietnam and the right to

investigate/investigate activities in criminal proceedings? .-cccc«esxeee 5

4 The significance of expanding and supplementing the investigative

authority of the State Securities Commission of Vietnam (SS©) 9 5.The direct investigation authority or support for investigations by the State Securities Commission (SSC) in the Securities Law of other countries around the

90 :::'ỪŨỒ aăai'i' 10

6 The current situation regarding the investigative authority of the State

Securities Commission of ViefiaIm\2 - - sn nh HH net 11 6.1 POSiLV€ aSD€G - LH HH HH Họ HE ok kh 11

7 The legal framework for investigating violations by the State Securities

Commiission of Viefnam cọ Họ ok BE 14

8 Practice: Proving that the State Securities Commission of Vietnam has

authority related to criminal CaS€S - L1 SH TH nọ kh Hà 14

9 Recommendations to enhance the capabilities of the State Securities

Commission in protecting the Vietnamese stock market: . -. -‹ - +: 16

10 The group proposes some additional investigative rights that the State Securities Commission of Vietnam can add to protect the Vietnamese stock

0o 18 091908010900 18

OPENING STATEMENT

The corporate bond stock market is an efficient channel for capital mobilization within the economy In recent years, the Vietnamese stock market has witnessed robust development, with the scale of transactions continuously increasing With over 20 years

of formation and advancement, the Vietnamese stock market has marked several remarkable milestones, reflecting substantial growth alongside the country's overall development

In recent years, the Vietnamese stock market has experienced remarkable development, evident in the increasing number of Vietnamese companies with a market Capitalization exceeding 1 billion USD The overall stock market capitalization has surged significantly, ranging from 30% to 90% of Vietnam's GDP From the end of January 2020, the market capitalization of equities reached 4,770 trillion Vietnamese dong, equivalent to 7% of the GDP The average transaction value in 2020 stood at 6,671 trillion dong per session, with 759 listed stocks, fund certificates, and registered trading certificates totaling 1,479 trillion dong The number of investor accounts reached around 2.7 million, including nearly 31 thousand accounts held by foreign investors

Alongside its positive aspects, the stock market also harbors various risks stemming from legal violations that impact its operations, contrary to the collective interests of the market, encroaching upon the legal rights and benefits of organizations and individuals The reasons for these risks are multifaceted, arising objectively and subjectively Objectively, Vietnam's stock market has been established and developed within a context where market factors are still rudimentary, the nature of secu rities activities is intricate and sensitive, while the understanding of market participants and individual investors remains limited Adherence to general law or securities law is not yet comprehensive Coinciding with the market's expansion, the increasing diversification

of stock market activities has led to more sophisticated and intricate legal infractions occurring within the market

Hence, the investigatory authority for violations within the stock market held by the State Securities Commission plays an extremely pivotal role Augmenting these investigatory powers will ensure that the State Securities Commission proactively and autonomously pursues all violations within the stock market, thus preventing securities- related crimes and fostering a transparent, healthy stock market

1 Concept

The State Securities Commission of Vietnam (SSC) is an agency under the Ministry of Finance responsible for advising and assisting the Minister of Finance in state management of securities and the stock market

2 The nature of the right to investigate violations of the State Securities

Commission of Vietnam when performing the function of state management of

securities and the securities market in Vietnam

2.1 Vietnam State Securities Commission

The State Securities Commission of Vietnam (SSC) is the government agency responsible for managing and supervising the stock market in Vietnam The State Securities Commission of Vietnam has the authority to investigate violations of securities laws when performing the function of state management of securities and the securities market in Vietnam

2.2 Right to investigate violations of the State Securities Commission of

Vietnam regarding securities and securities market in Vietnam

The State Securities Commission's investigative rights include the ability to conduct inspections, audits and investigations of individuals and organizations suspected of violating securities laws and regulations These investigations may involve gathering evidence, interviewing witnesses, and issuing subpoenas

The State Securities Commission also has the right to impose sanctions and penalties for violations of securities laws and regulations These sanctions may include fines, license revocations, and other disciplinary measures

The 2019 Securities Law along with Decree 156/2020/ND-CP has made new amendments in handling administrative violations in the field of securities and the stock market

The Securities Law 2019 has added a number of rights to the State Securities Commission in applying measures to ensure security and safety of the stock market such as: authority to comprehensively manage and supervise activities on securities and the stock market, more convenient in detecting and verifying violations Specifically, the State Securities Commission has the additional right to request agencies, organizations and individuals that have information, documents and data related to the content of examination and inspection to provide it to the Securities Commission State contracts upon request to clarify the relationship and cash flow of suspected subjects, as a basis for verifying and handling violations The State Securities Commission has the right to request credit institutions and foreign bank branches in Vietnam to provide information related to transactions on customer accounts in cases showing signs of fraud Prohibited acts in securities and stock market activities The State Securities Commission also has the additional right to request telecommunications businesses to provide names, addresses, calling and receiving phone numbers, and call time to verify and handle violations of the law In addition, the State Securities Commission also has the right to request organizations and

individuals to explain and come to work related to the content of inspection and examination (Article 130 - Securities Law 2019)

In general, the nature of the State Securities Commission's authority to investigate violations of securities laws and regulations is to ensure compliance with securities laws and regulations and protect the rights of the State Securities Commission investors' benefits and maintaining transparency of the stock market in Vietnam But currently, administrative sanctions are used too much by the State Securities Commission, causing the market to become "addicted to drugs", so to correct it, the role of the State Securities Commission needs to be enhanced to a higher level and the granting of investigation and prosecution powers to the State Securities Commission is

no longer new

The proposal to give the State Securities Commission the right to investigate and prosecute the Ministry of Finance is considered a surprising move Accordingly, in comments on the draft revised Criminal Procedure Code just sent to the Supreme People's Procuracy, the Ministry of Finance requested the Drafting Committee to add the authority to prosecute and initially investigate to the Committee State Securities for three crimes specified in the Penal Code including: the crime of intentionally publishing false information or concealing the truth in securities activities (Article 181a), the crime of using internal information to securities trading (Article 181b) and securities price manipulation (Article 181Cc)

This power is much higher than the current power of the State Securities Commission, which only limits fines and administrative sanctions against violating organizations and individuals In serious cases, the Committee turns to the police for investigation and handling Because basically, the State Securities Commission is still just an agency under the management of the Ministry of Finance

3 Distinguish between the right to investigate/investigate violations in state

management of the State Securities Commission of Vietnam and the right to

investigate/investigate activities in criminal proceedings?

Characteristic Right to _ investigate/ Right to

Activities to investigate| investigate/Investigation violations in state managemen| activities of violations ¡in

of the State Securities criminal proceedings Commission of Vietnam

Subject Only investigate in the fiel Applies to all crimes matter of securities, stock market aj

investigated securities-related activities

Subject under Organizations, individuals Individuals, organizations

investigation shareholders and_ individua businesses, state agencies

related to the stock market a stock trading activities

other entities involved i violating the law These subjed may be investigated, prosecut and handled according to t provisions of law

Scope of

investigation

Only investigate activitie related to securities, not oth activities

Can investigate all activitie related to crimes such as the murder, fraud, fraud, and oth crimes

Authorization

Has the authority t investigate violations g securities laws, the stock mark and publish financia information of enterprises on th stock market

Have the authority of a investigative agency (polic judicial agency) to condu activities of collecting evidence searching for informatior verifying, searching, arrestin detaining, investigating ac violate criminal law

Pursuant to Article 165 of th

2015 Criminal Procedure Code

1 The investigation agen¢

of the People's Public Secur investigates all crimes, except f crimes under the investigatia authority of the Investigatio Agency inthe People's Army aj the Investigation Agency of th Supreme People's Procuracy

2 The investigation agen inthe People's Army investigat crimes under the jurisdiction the Military Court

3 The Investigation Agenc

of the Supreme People Procuracy, the Investigatid Agency of the Central Military Procuracy investigate crim infringing on judicial activities

crimes related to corruption, a positions specified in Chapt XXIll and Chapter XXIV of the Penal Code occurs in judici activities where the offender

an officer or civil servant of th Investigation Agency, Cour

enforcement agency, or pers with authority to conduct th operation judicial action

4 Investigation agencie have the authority to investiga criminal cases where crim occur within their territory In cases where the crime w committed in many differen places or the location where t crime occurred cannot t determined, the investigatia falls under the jurisdiction of th Investigation Agency where th crime was discovered, where t suspect resides or was arreste

Purpose Investigation activities a

violations in state manageme

of the State Securitie Commission of Vietnam aim t detect, verify and resolw violations in the securities sect

to protect the interests investors and ensure the saf

of investors stability of the stod market

Investigation activities in criminal proceedings aim t identify and prove the violation

of subjects in criminal cases bring about criminal penalties

Investigation

process Submit to the Minister a

Finance for promulgation or f submit to competent authoriti¢

for promulgation of lega The authority to investigat

in criminal cases is determine based on the following thre

documents on securities a stock market, strategies, plar schemes, and policies for sta market development Carry o inspections and tests compliance with lega regulations on securities and t

According to the organizational system of th Investigation Agency - type q Investigation Agency: People Public Security, People Procuracy (People's Procurac People's Court (People's Court stock market; handl

administrative violations in thi field Guide and supervise th activities of organizations ar individuals related to stod market operations

By territory: Investigation agencies have the authority investigate criminal cases whe crimes occur within — thei territory

By type of crime: The investigation agency has t authority to investigate crimina cases of the type of crim assigned to it

The difference in the investigative authority of the State Securities Commission compared to the investigative authority in criminal cases is:

- The State Securities Commission is not an organization of the criminal investigation agency in this system

- The State Securities Commission only investigates and sanctions at the administrative level

For example: in the case of a securities violation, the State Securities Commission

is a more specialized agency and will conduct the investigation, so the investigation will

be more convenient even though a lawsuit or denunciation is filed at another investigative agency

Principle of coordination: Investigation agencies involved in the case must coordinate with each other to exchange information, share experiences and support each other in investigation work

For example: The police investigation agency coordinates with the State Securities Commission to handle the investigation, then the investigation police agency will have the advantage of expertise in investigation operations while the Securities Commission The state plays a professional role in this work

4 The significance of expanding and supplementing the investigative

authority of the State Securities Commission of Vietnam (SSC)

Currently, the authority of the State Securities Commission is still limited, and the handling of administrative violations in the securities sector and the stock market, as stipulated by the Law No 67/2022/QH14 amending and supplementing some articles of the Law on Handling of Administrative Violations in 2012, effective from January 1,

2022, has also revised and supplemented principles and provisions regarding the level

of administrative fines related to interpretation of terms, maximum fine amounts, and adjudicating authori ty However, the fact that only administrative violations can be fined and the State Securities Commission lacks the authority to investigate misconduct in the securities field has facilitated an environment conducive to those intending to violate the securities market The State Securities Commission's lack of investigative authority has slowed down the prevention, timely detection, and intervention of such behaviors Expanding the investigative authority of the Vietnam State Securities Commission into violations is crucial for several reasons:

+ Strengthening enforcement: Broadening the Commission's authority would enhance its ability to promptly detect and address securities law violations, preventing adverse effects on investors It would provide additional resources, tools, and capabilities to investigate, prosecute, and penalize offenders, thereby establishing a more effective regulatory system

+ Investor protection: Expanded authority would safeguard investor rights by curbing fraudulent activities and promoting fairness and transparency in the stock market This fosters investor confidence and encourages increased investment, which is vital for the country's economic development and growth

+Facilitating international cooperation in the securities sector: Expanding authority aligns with international best practices in securities regulation, fostering regulatory harmonization It facilitates cross-border securities transactions and attracts foreign investment, essential for the country's economic development

+ Increased accountability and transparency: Expanded authority ensures greater accountability and transparency in securities law management It helps prevent corruption and boosts public trust in the regu latory system, crucial for maintaining the integrity of the stock market

Overall, expanding the investigatory authority of the State Securities Commission

of Vietnam is pivotal in enhancing investor protection, promoting regulatory harmonization, and maintaining transparency in the stock market

Conclusion: Granting additional authority to the State Securities Commission of Vietnam to investigate violations can enhance the effective management of Vietnam's securities market The ability to investigate and penalize individuals or entities engaging

in unethical or illegal activities can prevent such behaviors and promote transparency and fairness in the market Additionally, it may bolster investor confidence, attract more capital into the market, and drive economic growth However, it is essential to ensure

that this authority is exercised cautiously and subject to appropriate oversight to prevent abuse of power or procedural violations

5.The direct investigation authority or support for investigations by the State Securities Commission (SSC) in the Securities Law of other countries around the world

The State Securities Commission typically holds the authority to investigate violations of securities laws and regulations within its jurisdiction and may enforce coercive measures against individuals or entities found to be in breach The specific scope and limitations of this authority can vary depending on the legislation and regulations applicable within each financial jurisdiction

In many countries, the authority of the SSC is substantial, including investigatory and prosecutorial rights, with the SEC being a typical example In numerous nations, the management and supervision of the stock market are conducted by an independent agency within the state apparatus, possessing relatively broad jurisdiction For instance,

in the United States, under the Securities Acts of 1933 and 1934, the Securities and Exchange Commission (SEC) is an independent government agency The SEC Chairman is appointed by the President, subject to Senate approval Additionally, other commissions such as the China Securities Regulatory Commission or the Securities and Exchange Commission of Thailand also hold powers equivalent to a ministry, directly under the government

The China Securities Regulatory Commission (CSRC) is the national regulatory body overseeing the securities and futures transactions in China, responsible for maintaining market order and fairness The CSRC reports directly to the State Council

of China, the central administrative body in China Notably, the Chinese securities regulatory agency holds authority to investigate, enforce laws, and regulations set by the CSRC, imposing penalties for any violations

The Securities and Exchange Commission (SEC) is one of the federal government agencies in the United States Its primary function involves overseeing organizations and individuals in the securities market, including stock exchanges, brokerage firms, agents, investment advisors, and investment funds Through established securities rules and regulations, the SEC promotes market transparency, fair trading, and safeguards against fraud by encouraging disclosure and sharing market- related information The SEC ranks among the four largest regulatory bodies in the U.S financial market As a regulatory agency, the SEC holds extensive influence in the economic realm and operates as an independent judicial body involved in the most complex legal disputes within the market The tools and methodologies utilized by the SEC to resolve disputes and conflicts set a standard for international regulatory bodies Virtually everything invested or traded in securities, in one way or another, falls under the oversight of the SEC

In Thailand, the securities market regulatory body is also a governmental agency, with authority equivalent to a ministry, headed by a government member