The Securities Law prohibits the use of inside information to purchase or trade in shares of public companies. Failure to comply with the insider trading rules may result in administrative penalty and the transaction may be held invalid. The broad definition of inside information, in theory, may include certain information obtained by a potential strategic investor in the course of due diligence into a Public Joint Stock Company (Public JSC) in advance of a potential private acquisition. Therefore, theoretically, if a proposed strategic investment is predicated on the use of inside information relating to a Public JSC in the course of due diligence, the proposed investment might be subject to insider trading restrictions under the Securities Law. This may also give rise to insider trading liabilities for the relevant potential investor, who relies on non-public due diligence information to make an investment in a Public JSC.

The issue of selective disclosure in the context of a private acquisition in a Public JSC appears to have not been considered when the Securities Law was drafted. Thus, the restriction appears to be one of omission rather than a specific intention to prohibit or regulate. Unfortunately, a resolution of this issue, which will create an environment of greater regulatory certainty for potential strategic and institutional investors, will likely take many years in Vietnam.

That being said, the securities regulations allow certain “inside shareholders” in a Public JSC who have or are deemed to have inside information to trade shares in Public JSC provided that certain public disclosures are made before and after the proposed trade. It is not clear if potential investors in a Public JSC may make public disclosures in the same manner as an inside shareholders do to avoid potential insider trading liabilities.