Violations in securities trading in the first half of 2006 increased compared to the same period of 2005.

The violations harmed the interests of investors, particularly individual ones, but violators were just ‘warned’ and none of them were named publicly.

According to reports from the HCM City Securities Trading Centre, the centre’s supervision task in the first half of 2006 focused on two major issues: trading operations of organisational and individual investors in the stock market and their abidance of stock rules.

More and more violations

Regarding observation of law abidance, the centre concentrated on discovering and preventing investors from opening multiple accounts, detecting transactions that violated rules on information disclosure, catching investors who bought and sold the same kind of stock on the same day, and detecting violations in stock transactions by large shareholders.

In the first half of 2006, the HCM City Securities Trading Centre found 12 cases (compared to eight in the corresponding period of 2005) in which key members of listed organisations and related persons had made transactions of internal stocks, violating Article 34 of Decree 144/2003/ND of the government.

Most of the cases occurred in early months of the year because in this period the prices for shares strongly fluctuated and many new kinds of shares were listed on the bourse.

The centre also detected 43 cases (compared to 38 cases in the same period of 2005) in which investors bought and sold the same kinds of shares on the same day, violating Article III. 13.1 of Circular 58/2004/TT-BTC of the Ministry of Finance.

In addition, the centre discovered 803 cases of investors opening multiple accounts at the same time to serve share trading, violating the regulations on account opening, which stipulate that investors are only allowed to open one account in one securities trading company.

As to observation of stock trading activities, the centre focused on market-control and infiltrative transactions through analysing stocks that saw abnormal changes. The centre sent many reports on suspicious cases to the State Securities Council.

Last year the HCM City Securities Trading Centre detected only two cases of the above kind.

The centre has regularly watched for and analysed accounts which placed orders for large amounts of shares, but no case has been made public so far.

Information disclosure still lack transparency

According to the HCM City Securities Trading Centre, it is quite common for securities trading companies to violate regulations on reporting, particularly regulations concerning the timeframes in which they are required to submit reports and report inaccurate data.

The centre has recommended that the Stock Market Inspection Committee punish companies breaking rules on reporting in three consecutive periods and to permit the centre to publicly warn the violators about their actions.

Common violations related to information disclosure are late disclosure of information on internal transactions of shares or transactions of big shareholders.

This affects the interests of individual investors.

Not surprisingly, most listed companies don’t take the initiative in disclosing extraordinary information. They often wait till the media reports about their cases to give explanations.

According to the current rules on securities and the stock market, when companies announce extraordinary information, they must deliver the information through the means of information release of securities trading centres within 24 hours after the event occurs. The information must describe the event, reasons, and plans and solutions to deal with the case, if there are any.

The centre has so far just warned violators about their wrongdoings and not disciplined them, resulting in an increase of violations.

Many investors are anxious about this situation and have asked the HCM City Securities Trading Centre to make public the names of violators in the media, not only through the official information released by the centre.