Typical Cases of Insider Trading

Chapter 1 Summary

Chapter 1 has completed research objectives 1 and 2 of the thesis, and answered research questions 1, 2, 3, and 4.

There are five ways to commit fraud in the stock market, including continuously buying and selling securities to create artificial supply and demand for securities, continuously trading with controlling volume, giving opinions on investment trends to influence stock prices, creating and publishing false information, and using unpublished inside information in securities transactions.

Groups of opportunity factors leading to fraudulent behavior include groups of opportunity factors caused by insiders and issuers, groups of opportunity factors caused by investors, and groups of opportunity factors caused by management and market supervision.

The content of state management of the securities market needs to be considered from three perspectives: according to function, according to business activities and according to market factors. The methods used to manage fraudulent behaviors include administrative methods, economic methods and educational methods. State management tools in the economic field include laws, plans, policies and national resources.

In chapter 1, the thesis also analyzed the impacts of fraudulent behavior on investors, listed enterprises and the stock market, and synthesized the management experiences of countries on fraudulent behavior in the stock market. Finally, from the overview of domestic and foreign research, the thesis pointed out the gaps that need to be researched.

CHAPTER 2

RESEARCH METHODS AND RESEARCH MODELS

2.1 Research process

To achieve the research objectives and research questions, the research process is carried out in the following order of steps:

Step 1: From an overview of domestic and foreign research works, the thesis answers research questions 1, 2, 3 on ways to commit fraud in the stock market, opportunity factors leading to fraud in the stock market, and the impact of fraud in the stock market. Analyze the contents, tools, and methods of managing fraud in the stock market, and answer research question 4.

Step 2: Synthesize and analyze secondary data on statistics of fraud in the stock market, records of fraud cases in the Vietnamese stock market through data sources from the State Securities Commission. From there, point out the characteristics of fraud in the Vietnamese stock market, answering research question number 5. At the same time, through analyzing records of typical fraud cases in the Vietnamese stock market, the opportunity factors leading to fraud and ways to commit fraud in the Vietnamese stock market are listed. From there, complete the survey form before conducting in-depth interviews with experts.

Step 3: Conduct in-depth interviews with experts at state management agencies on the stock market (Securities Commission, Stock Exchange...), managers with many years of experience at securities companies, fund management companies, investors with more than 5 years of experience. This step helps confirm or eliminate or add scales, methods of measuring independent and dependent variables, helping to complete the survey before widely distributing it to the survey subjects.

Step 4: Conduct a survey and collect and process data. The survey form (PKS) is sent to experts to collect their opinions and perspectives on the opportunity factors leading to fraudulent behavior in the Vietnamese stock market. The data is processed and analyzed by SPSS software. Exploratory factor analysis to identify opportunity factors leading to fraudulent behavior in the Vietnamese stock market

Nam. Using regression model to clarify the impact level of opportunity factors on fraudulent behavior in Vietnam stock market. Therefore, answer research questions 6, 7, 8.

Step 5: Analyze the contents, methods and tools that the State Securities Commission implements to manage fraudulent acts in the Vietnamese stock market. Analyze typical situations of managing fraudulent acts in the Vietnamese stock market. Answer research question number 9.

Step 6: Based on the analysis of the current status of fraud and management of fraud, propose appropriate solutions and recommendations for the State Securities Commission to strengthen the management of fraud in the Vietnamese stock market (Answer to research question No. 10)

A summary of the research process is shown in Figure 3.1 below.

Research Overview

Research Gap

Content

Method

Tools

Summary of opportunity factors leading to fraudulent behavior, ways to commit fraud in the stock market

Collect secondary data from the State Securities Commission to

analysis of typical situations

Current status of management of fraudulent behavior in the stock market

Preliminary PKS Design

Primary data collection

In-depth interviews with experts to perfect PKS

Distribute survey forms and collect and process data

Analyze and discuss results

Figure 2.1: Research process

Solutions to enhance fraud management

2.2 Qualitative research methods

Qualitative research methods are used to analyze data that cannot be digitized, or to explain content related to human behavior and perception. Usually, this method helps to supplement and strengthen the results of qualitative research methods. Conversely, qualitative research methods can be used to explain more clearly the results of quantitative research.

In this thesis, qualitative research methods are used to confirm, supplement, and complete the survey form, serving quantitative research. In addition, it also analyzes and explains clearly the current situation of fraudulent behavior in the Vietnamese stock market and the current state management in preventing and limiting fraudulent behavior in the Vietnamese stock market. The thesis uses qualitative research methods including typical case studies and in-depth interviews.

Table 2.1: Qualitative research methods

Method of use

Target

Case study

- Identify ways to commit fraud and opportunity factors leading to fraud in the Vietnamese stock market.

- Analyze some existing problems in managing fraudulent behaviors through real-life situations.

In-depth interviews with experts

Supplement, confirm the variable measurement scale and complete the survey form.

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2.2.1 Typical case study method

Purpose

Case studies are particularly useful for gaining a detailed contextual view of specific phenomena. This is especially true when researchers cannot, for practical reasons, conduct empirical studies. The limitation of the case study method is that it is a descriptive method, not an explanatory method, so it is not possible to draw cause-effect relationships. According to Nguyen Van Thang (2015), case studies are situations that clearly reflect the research problem.

The thesis uses the case study method to analyze the process of committing fraudulent acts of the subjects. The fraud triangle theory is applied to point out the opportunity factors and ways of committing fraudulent acts in the Vietnamese stock market, from which it is possible to build and design a preliminary form.

survey for quantitative research. In addition, this method uses efficient market theory to analyze abnormal price movements without any fundamental explanation as a sign of fraud; uses signaling theory to show that when insiders and related parties have unusual stock transactions before the company announces important information that affects the stock price, it is a sign of fraud; uses behavioral finance theory to analyze situations showing that investors often tend to be herd-like, which creates opportunities for price manipulation to be carried out.

Data

Data is collected from the synthesis of reports on fraud cases in the Vietnamese stock market in the period 2010 - 2019 provided by the State Securities Commission; information from the Hanoi Stock Exchange, Ho Chi Minh Stock Exchange, securities companies and magazines and newspapers specializing in the securities field. Typical and representative cases will be selected for research and analysis. Typical situations are selected based on the statistics of the State Securities Commission's penalty decisions due to the delay between the time of committing the fraud and the time of the penalty decision. The statistical source is used from the statistics of the penalty decisions of the State Securities Commission. The table of typical situations selected for research and analysis includes:

Table 2.2: Typical insider trading situations

Code

Object

perform

Year

Typicality

TH1

(Appendix 02)

D.TK

NTN

NVG

KSH

2010

This case shows that insider trading is actually very difficult to detect. Because the relationship in society is very complicated, apart from the person who directly obtains inside information (Tippers), it is very difficult to identify Tippees (those who receive inside information).

TH2

LHA

SKG

2017

This case shows that delay in information disclosure is a warning sign of possible insider trading. When a company has good/bad information that has an impact

increase/decrease stock prices but

Code	Object perform	CP	Year	Typicality
					If not disclosed promptly, there may have been insider trading in the past.
3	TH3	D.HL PHH NTTM LTAH LQM NTHY HVD VTH	SHN	2012	This case shows that it is very difficult to prove insider trading violations if the individual and the company themselves do not violate information disclosure. Pointing out the "loopholes" in the management of internal information and internal transactions of the issuing organization. In the face of important information that has not been disclosed, a series of company insiders sold off shares to avoid losses but did not have enough evidence to punish, leading to incorrect assessment of crimes and omission of criminals.
4	TH4 (Appendix 03)	VTN	SBC	2015	The SBC case shows that the company and its key leaders frequently violate information disclosure, which is a negative sign, suggesting other possible fraudulent acts, including insider trading. Due to insufficient evidence, it leads to an incorrect assessment of the crime. Instead of punishing insider trading, the subjects are only punished for violating in insider disclosure.
5	TH5 (Appendix 04)	TVD	D2D		Insider transactions before the time of information disclosure often circumvent the law by violating the type of "Failure to disclose information about transaction intentions and transaction results". Due to insufficient evidence, leading to incorrect assessment of criminal behavior. Instead of being punished for insider trading, the subjects are only punished for violations in information disclosure by insiders.

Source: Author's synthesis

Table 2.3: Typical scenarios of price manipulation

Code	Object perform	CP	Year	Typicality
1	TH6	LVD	DVD	2011	Since the crime of "price manipulation"
		LVM			securities” was added to the Law
		LMT			amending and supplementing a number of articles of the Ministry
		NVV			Criminal Code No. 37/2009/QH12 dated
					June 19, 2009, effective from
					January 1, 2010 DVD was the first case
					prosecuted criminally. This is also
					serious violation by nature
					Complexity: price manipulation immediately after
					when stocks are listed, manipulation
					double other stocks in the same industry,
					colluded with company employees
					securities… causing damage to many
					businesses and investors
2	TH7	H.D.D	TNT	2016	The TNT manipulation case shows the measure
	(Extra	LTT		2018	more severe punishment for the behavior
	Appendix 05)				stock manipulation. investor
					required to pay additional profits
					illegal from manipulation.
					This is considered a record fine payment for fish.
					at that time. TNT case also gave
					see the manipulation taking place
					quite common, when just discovered
					This investor manipulates then the investor
					another thought continued. However,
					detection and handling by the agency
					function is still delayed, sometimes to
					several years after the violation.

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