In practice, there are many cases in which shareholders violate insider trading regulations by taking advantage of undisclosed information or their positions and special relationships within the enterprise to seek unlawful gains, thereby causing damage to the company and other shareholders and undermining confidence in corporate governance mechanisms.
I. Current situation of shareholders violating insider trading regulations
In reality, many shareholders violate insider trading regulations by buying or selling shares based on undisclosed internal information, or by conducting transactions with the company or related persons without complying with statutory requirements on information disclosure, approval, or consent as prescribed by law and the company’s charter. These violations take various sophisticated and hard-to-detect forms, particularly in public companies and companies with concentrated ownership structures, where major shareholders or internal shareholders hold significant informational advantages.
In addition, internal governance systems and mechanisms for controlling insider transactions in many enterprises remain inadequate; awareness of and compliance with the law by a portion of shareholders are still limited, while sanctions for violations are not sufficiently deterrent. As a result, insider trading violations not only infringe upon the lawful rights and interests of other shareholders but also reduce transparency and fairness in the business environment and the securities market, thereby creating an urgent need to further the legal framework and enhance enforcement effectiveness in the coming period.
II. Understanding shareholders violating insider trading regulations
In the context where transparency in corporate governance and protection of shareholders’ rights are increasingly prioritized, identifying and clarifying acts of shareholders that violate insider trading regulations is of particular importance.
1. Who are shareholders that violate insider trading regulations?
A shareholder who violates insider trading regulations is a shareholder who conducts transactions involving the purchase or sale of shares, or transactions with the company or related persons, based on undisclosed internal information, or who fails to comply with legal obligations regarding information disclosure, approval, or transaction restrictions as prescribed by law and the company’s charter.
Such conduct is often associated with the shareholder’s informational advantage or special position within the enterprise, leading to transactions that do not ensure fairness and transparency.
2. Why do violations of insider trading regulations by shareholders affect the company?
Violations of insider trading regulations may cause direct financial losses, distort share value, and adversely affect corporate governance and the company’s reputation.
At the same time, such acts infringe upon the lawful rights and interests of other shareholders, erode investor confidence, and may expose the company to legal risks and sanctions if internal control mechanisms are not properly implemented.
3. How can shareholders who violate insider trading regulations be identified?
Shareholders who violate insider trading regulations often exhibit signs such as: trading large volumes of shares immediately before or after the company discloses material information; failing to perform or inadequately performing information disclosure obligations; conducting transactions through related persons to conceal the true beneficiary; or engaging in transactions with the company without following approval procedures as required by law and the company’s charter.
4. What types of transactions may lead to violations of insider trading regulations?
Transactions that are led to insider trading violations include: buying or selling shares based on insider information; transferring shares through related persons; lending, providing guarantees, or buying and selling assets between shareholders and the company; entering into economic contracts not based on market prices; or other transactions that may lead to conflicts of interest but are not disclosed or approved in accordance with statutory procedures.
III. Legal regulations relating to shareholders’ violations of insider trading rules
In the context of strengthening discipline, transparency, and the prevention of conflicts of interest in corporate governance, Vietnamese law has established a relatively comprehensive regulatory framework to govern and control insider transactions by shareholders.
1. Which legal regulations apply to shareholders who violate insider trading rules?
The Law on Enterprise 2020 serves as the primary legal basis governing insider transactions in joint stock companies.
- Clause 1, Article 167 of the Law on Enterprise 2020 stipulates that contracts and transactions between the company and shareholders owning 10% or more of the charter capital, and their related persons, must be approved by the General Meeting of Shareholders or the Board of Directors.
- Clause 5, Article 167 provides that contracts and transactions established in violation of these regulations may be declared invalid, and related persons must compensate for damages and return any unlawful benefits obtained to the company.
In addition, for public companies, shareholders are also subject to the Law on Securities 2019. Clause 2, Article 12 of the Law on Securities 2019 strictly prohibits the use of insider information to buy or sell securities for one’s own benefit or for the benefit of others.
Accordingly, when a shareholder conducts insider transactions without complying with the above regulations, such conduct is deemed a violation of the law.
2. What is the legal procedure for handling shareholders who violate insider trading regulations?
From an internal corporate perspective, when a transaction showing signs of violation is detected, the company is responsible for reviewing and reporting it to the Board of Directors or the General Meeting of Shareholders in accordance with Clause 5, Article 167 of the Law on Enterprise 2020. The violating transaction may be suspended, annulled, or required to be amended; at the same time, the violating shareholder must compensate for damages if losses are caused to the company.
For public companies, pursuant to Article 132 of the Law on Securities 2019, violations will be subject to inspection and examination by the State Securities Commission or the Stock Exchange. Based on the findings, competent authorities may impose administrative sanctions, apply remedial measures, or transfer the case file to investigative bodies if there are signs of criminal offenses.
Thus, the handling of insider trading violations by shareholders follows a combined approach of internal corporate measures and state enforcement, ensuring deterrence and prevention of violations.
3. What risks may arise from shareholders’ violations of insider trading regulations?
For violating shareholders, legal risks include the obligation to return all unlawful gains derived from illegal insider transactions, the imposition of substantial fines, and even criminal liability in serious cases. In addition, the shareholder’s reputation and standing within the company may be significantly diminished.
For the company, unlawful insider transactions may result in financial losses, internal disputes, adverse impacts on corporate governance, and reduced investor confidence. In the long term, such violations undermine market transparency and fairness, hindering the sustainable development of enterprises and the overall business environment.
IV. Questions relating to shareholders’ violations of insider trading regulations
In practice, although insider trading regulations have been relatively comprehensively codified, difficulties still arise in identifying violations and determining shareholders’ legal liabilities. Below are some frequently asked questions reflecting common situations in joint stock companies and the securities market.
1. If a shareholder sells shares to a relative without disclosure, is this considered a violation of insider trading regulations? Why?
In many cases, a shareholder’s sale of shares to a relative without information disclosure may still be regarded as a violation of insider trading regulations, particularly for major shareholders, internal shareholders, or shareholders of public companies.
Pursuant to Clause 46, Article 4 of the Law on Securities 2019, relatives such as spouses, parents, children, and siblings are considered related persons. When a shareholder conducts share transactions through related persons without fulfilling disclosure or transaction registration obligations, such conduct is viewed as an evasion of transparency requirements and a distortion of market information. The law assesses not only the form of the transaction but also its substance in terms of control and benefit; therefore, a “transfer to a relative” does not create an exception from liability.
2. Which aspects of insider trading regulations are most commonly violated by shareholders?
In practice, violations by shareholders typically fall into three main categories:
First, violations of information disclosure and transaction reporting obligations, including failure to report prior to trading, incomplete reporting, or late reporting beyond statutory deadlines. It is the most common violation, often due to negligence or intentional concealment.
Second, the use of undisclosed insider information to buy or sell shares, particularly before the company discloses material information such as business results, mergers, dividend distributions, or changes in senior management.
Third, conducting transactions with the company or related persons without obtaining approval from competent authorities, thereby violating conflict-of-interest control procedures under the Law on Enterprise 2020.
3. What does the law provide regarding notifying shareholders when insider trading violations are detected?
Current law does not specifically stipulate mandatory notification to shareholders upon detection of insider trading violations. However, in practice, when transactions showing signs of violation are identified, the Board of Directors and the Supervisory Board are responsible for reviewing the matter, requesting explanations, and reporting to the General Meeting of Shareholders when necessary. Information on violating transactions must be recorded in meeting minutes and corporate governance reports.
4. Can shareholders who violate insider trading regulations be subject to criminal liability?
Shareholders who violate insider trading regulations may be subject to criminal liability if their conduct satisfies the constituent elements of a criminal offense.
Specifically:
- Article 210 of the Penal Code 2015 (as amended and supplemented in 2017) provides for the offense of “Using insider information to trade securities”.
- Article 211 of the Penal Code (as amended and supplemented in 2017) provides for the offense of “Manipulating the securities market”.
Accordingly, when insider trading conduct exceeds the threshold of administrative violations and causes serious consequences to the securities market, shareholders may face not only monetary fines or trading restrictions but also criminal prosecution, leading to long-term legal consequences affecting their reputation and future participation in the market.
5. How can a shareholder protect themselves if they unintentionally violate insider trading regulations? What are the most common penalties applied?
In cases of unintentional violations, shareholders should:
- Proactively report and make supplementary disclosures of the transaction;
- Return any unlawful gains (if any);
- Fully cooperate with regulatory authorities.
Pursuant to Article 4 of Decree No. 156/2020/ND-CP, as amended and supplemented by Decree No. 306/2025/ND-CP and Decree No. 128/2021/ND-CP on administrative sanctions in the securities sector, the most common penalties include:
- Monetary fines;
- Suspension of securities trading activities for a period ranging from 01 month to 12 months;
- Revocation of the right to use certificates of registration for representative office operations or securities practicing certificates for a period ranging from 01 month to 24 months; etc.
Early identification of errors, proactive remediation, and good-faith cooperation with regulatory authorities not only help shareholders protect their lawful rights and interests but also serve as an important basis for the consideration of mitigating circumstances, thereby minimizing adverse sanctions under securities laws.
V. Are you seeking a reputable legal expert to assist with issues relating to shareholders’ violations of insider trading regulations?
Given their complexity, issues relating to insider trading violations by shareholders require in-depth and accurate legal advice. Consulting lawyers or legal experts with experience in corporate and securities law will help to:
- Accurately assess whether conduct constitutes a violation;
- Select appropriate risk-mitigation solutions;
- Maximize the protection of the lawful rights and interests of shareholders and the company.
The above information is for reference purposes only. Should you require detailed advice for a specific case, please contact NPLaw Law Firm for prompt consultation.
