Experts worry that a new plan to criminalize a wide range of stock trading violations could drive investors away.
They say only "very serious" offenses should be punished with jail terms.
Under Vietnam's Penal Code, manipulating stock prices and withholding or falsifying information could warrant jail terms of up to seven years.
Last year the country sentenced a stock tycoon to four years in prison in Vietnam's first criminal case filed for stock price manipulation. Le Van Dung, former chairman and general director of Vien Dong Pharma JSC, was convicted of opening different trading accounts to create fake demand and supply to attract investors.
The Ministry of Justice has proposed a new regulation, which would rank offenders based on how much money they have gained illegally so that a corresponding punishment can be applied.
Local media have cited experts as saying the regulation will allow local authorities to press criminal charges on violations that many other countries would address with civil penalties or fines.
The regulation considers even low-level violations as criminal offenses, Nguyen Thanh Ky, Secretary of the Vietnam Association of Securities Businesses, told the Dau Tu Chung Khoan (Securities Investment) newspaper. For instance, falsifying information that causes losses of VND200 million (US$9,600) to others is a criminal act under the regulation, but the starting point should be VND2 billion, he said.
"If these levels are not raised, the regulation could result in too many criminal cases. It is against international conventions and will make the stock market less competitive and depress investors," Ky said.
Lawyer Tran Minh Hai of BASICO Law Firm agreed that criminal charges and imprisonment could hinder the development of the stock market.
"It's necessary to follow other countries and deal with financial offenses by using financial penalties, instead of trying to criminalize these violations," he said.
Causing damages worth VND1 billion is a big deal in other sectors but in the stock market, due to its nature, the same act cannot be judged the same way, he said. Criminal charges should only be pressed on offenses at the VND4-5 billion scale, he felt.
Offenders should be given a chance to make up for their acts because putting them in jail could mean their victims will never be compensated financially, Hai said.
Nguyen Kim Long, Legal and Internal Control Director at Saigon Securities Inc., said stock trading violators do not deserve criminal charges if they cause losses of VND1 billion.
Long said the proposed regulation criminalizes information disclosure violations that allow traders to earn VND200 million. Considering it is not difficult for investors to earn that much money in just a few trading sessions, investors could feel anxious about making profits, he said.
That would have a negative impact on investor sentiment, he concluded.