Fixing Securities Law: Changing the market both in quality and quantity

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The draft Securities Law (amended) market regulations will be monitored by 3 levels instead of 2 levels as in the current law. Source: Internet.

Diverse goods

Currently, one of the risks to investors in the stock market is the offering of securities to the public. The current Securities Law does not separate conditions to match the different nature of initial public offering (IPO) with additional public offering. At the same time, the Law also does not stipulate the conditions for issuance scale and mass, leading to the case that the issuing enterprise with very large value, many times the equity, potential risks to investors.

According to Nguyen Quang Viet, Director of the Legal Department, State Securities Commission, to overcome this shortcoming, in the draft Law on Securities (amended), solutions that managers make in two directions: recently improving the quality of goods, newly deploying new products to change the current status of poor products currently dominate. In terms of improving the quality of goods, one of the conditions for the agency drafting a Securities Law project (amendment) is to raise the standards of public companies. Accordingly, in the draft Law on Securities (revised) submitted to the National Assembly for comments, public companies are companies with charter capital of 30 billionVND or more and have a minimum of 10% shares with voting rights because at least 100 investors are not major shareholders holding instead of having at least 20% of the contributed charter capital because at least 100 investors are not shareholders owning from 1% or more of the voting shares held as in previous drafts.

According to the explanation of the State Securities Commission, the reason for the drafting agency to select the criteria of 30 billionVND is due to the size of charter capital of 10 billionVND or more at the time of issuing the 2006 Securities Law is appropriate but relatively low compared to current businesses. With a capital of 30 billionVND, there are over 80% of businesses on two departments achieving this level of capital. This level is similar to markets in the ASEAN region. In addition, the fact that public companies have too small capital will be difficult to cover public companies' obligations in the stock market as the obligation to pay public company management fees, obligations of securities registration, listing/trading on the stock market; expenses for information disclosure obligations (set up website and fulfill information disclosure obligations through the website, set up the system and implement information disclosure through the State Securities Commission's information disclosure system); corporate governance obligations; mandatory auditing costs in accordance with the Securities Law.

Regarding the diversification of products for the market, the State Securities Commission said the draft Law on Securities (amended) has some regulations to pave the way for issuing the Non-voting Depository Receipt (NVDR). Technically, the only problem is who the NVDR's voting rights will belong to (Thailand cancels this voting right). The State Securities Commission is cooperating with the agency in drafting a revised Enterprise Law project in order to remove it in the future.

Increase market monitoring

Regarding market surveillance, one of the new points of the draft Securities Law (amendment) is that market regulation will be monitored by 3 levels instead of 2 levels as in the current law. Accordingly, apart from the current two levels are stock exchanges and the State Securities Commission, the draft law adds one level to securities companies. The draft law stipulates that securities companies, if detecting abnormal factors when providing services to customers, must report them. This is an international practice applied in many countries around the world, including in the region and European and American markets.

Along with that, according to the State Securities Commission, according to the provisions of the current Law, the competence of the State Securities Commission ininspection and handling of violations has not been as in international practice, such as: requesting information and explanation; access to cash flow; access to telecommunications information. Therefore, the draft law adds a number of rights to the State Securities Commission such as: requesting agencies, organizations and individuals to provide information, documents, data or requests for organization and individuals, submit to work related to inspection and examination contents; request credit institutions, bank branches in Vietnam to provide information relating to transactions on customers' accounts in cases where there are signs of prohibited acts in securities and marketing activities.

The draft law also stipulates that telecommunication enterprises must provide their names, addresses, phone numbers, number of machines called, and time to call to verify and handle prohibited acts. The State Securities Commission affirmed that the provisions of the revised Securities Law have overcome the limitations of the current Securities Law, ensuring the implementation of international commitments, preventing and combating law violations in securities sector is effective, ensuring compliance with other relevant laws such as the State Bank of Vietnam Law, Credit Institutions Law, Telecommunications Law.

Amending the Securities Law in order to develop the market in depth VCN- Mr. Le Duc Khanh, Strategic Director of Petro Vietnam Securities Company commented on the revised draft ...

In addition, in order to have strong sanctions, enhance deterrence, prevent and strictly handle violations in the market, the draft law stipulates the maximum penalty in the direction of some acts that seriously violate market transparency and safety such as market manipulation, internal transactions, the maximum fine level is 10 times the illegal revenue for organizations and 5 times the amount illegally collecting for individuals; for other violations, the maximum fine level is 3 billionVND for organizations and 1.5 billionVND for individuals.

Talking about the reasons for the drafting committee to give the above fine, Pham Thi Thanh Huong, Deputy Chief Inspector of the State Securities Commission shared, for the act of market manipulation of 500 million VND or more, is constituted as criminal. The current Law on Securities sanctioning administrative violations in the field of securities is 2 billionVND for organizations, 1 billionVND for individuals. Therefore, the Drafting Committee has calculated that the fine level is not too high for sectors and fields.