Long process to develop legal framework for securities market

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By the end of 2019, 1,662 companies were listed and registered for transactions with a market capitalization of approximately VND4,384 trillion (equivalent to 72.6% of GDP in 2019). Photo: Internet

Market size is constantly increasing

For many countries in the world, when securities are formed and put into operation for a period,the market management agency will develop a legal framework to regulate the market’s operations. In Vietnam, a State management agency was established and develops mechanisms and policies for the securities market before the market officially came into operation.

At the beginning, the legal framework for Vietnam's securities market was built only on the basis of reference to experience from other countries and in combination with Vietnam’s current legal system, because we do not have practical experience in this field.

On July 11, 1998, the Government issued Decree No. 48/1998 / ND-CP on securities and the securities market. This is an important milestone in the process of developing the legal framework for the securities market.

Accordingly, the State Securities Commission issued guiding documents (in this period, the State Securities Commission was an agency attached to the Government). These legal documents have initially created a legal framework for the opening and operation of the securities market in Vietnam since July 2000 with the establishment of the Ho Chi Minh City Stock Exchange.

After that, the legal documents governing the securities market were issued, replacing and supplementing each other to meet the changes of the securities market such as Decree No. 144/2003 / ND-CP replacing Decree No. 48/1998 / ND-CP, together with the guiding documents created a relatively uniform legal framework for the market activities such as issuing, listing, trading and information, handling of violations.

An important milestone for the securities market is that the Securities Law was adopted by the National Assembly on June 29, 2006 andwas effective on July 1, 2007. The Securities Law 2006 created an important legal corridor, ensured the securities market to operate publicly, transparently, safely and effectively andpromoted the importance of the securities market for the economy.

However, because Vietnam's securities market is still in the process of formation and development, there are many new factors, so on November 24, 2010, the National Assembly adoptedalaw amending and supplementing a number of articles of the Law Securities 2006.This new law took effect from July 1, 2011.

Basing on the Securities Law 2006 (amended and supplemented in 2010), the Government and the Prime Minister issued many decrees and decisions and the Prime Minister and the Ministry of Finance issued many circulars guiding the implementation.

The Securities Law and its guiding documents created a relatively complete and comprehensive legal framework to regulate securities and the securities market activities. The securities market is becoming a channel to attract long-term investment capital for the economy; reduce the gap between the bank credit channel and capital market channel, in order to increase social investment.

The reality has proved that if in 2006, the securities market had only about 200 listed companies with a market capitalization of about VND221,000 billion (accounting for about 22.7% of GDP in 2006), by the end of 2019, this figure was 1,662 with a market capitalization of about VND4,384 trillion (equivalent to 72.6% of GDP in 2019).

The value of capital mobilization of enterprises through the issuance of shares and corporate bonds in 2019 reached VND102.8 trillion, an increase of two times compared to the whole of 2018. The portfolio value of foreign investors reached nearly US$36.6 billion (equivalent to VND847,033 billion).

New Securities Law is officially issued

In addition to the above-mentioned results, the operation of Vietnam's securities market still has limitations and shortcomings such as: the quality of listed companies and the quality of securities companies are still low, participants in the securities market are mainly individual investors. Institutional investors (investment funds) are not significant.

In recent years, the Stock Exchanges and the Securities Depository Center have made many improvements in the mode of operation, but with the increasing market size and increasing number of listed companies and investors, the improvement of the market organization system for transactions, registration, depository, clearing and settlement of securities is required, creating the ability to connect with regional and international securities markets to attract domestic and foreign investment.

One of the main reasons for the limitations and shortcomings mentioned above is the incomplete legal framework on securities and the securities market. Contentsin some articles of the Law are still unclear and unspecific, leading to different interpretations and difficulties in application.

In addition, a number of provisions of the Securities Law 2006 and the Law amending and supplementing in 2010 are no longer consistent and synchronous with relevant provisions in the newly amended and supplemented legal documents such as the Civil Code, the Enterprise Law, the Investment Law, the Law on Handling Administrative Violations, the Inspection Law, the Law on Complaints and the Law on Denunciations.

Therefore, on November 26, 2019, the XIV National Assembly adopted the Securities Law No. 54/2019 / QH14, effective from January 1, 2021, replacing the Securities Law No. 70/2006. / QH11 and Law No. 62/2010 / QH12.

In general, the Securities Law 2019 was amended and supplemented comprehensively in accordance with international standards and practices, creating a legal basis for a new development stage of the securities market.

The State Securities Commission expected that, after taking effect, the Securities Law 2019 would contribute to improving the quality of products and the quality of companies on the securities market, attract domestic and foreign investors, improve the capacity and quality of activities of market participants, increase the openness and transparency and ensure the securities market operates in a sustainable, safe, professional and modern manner.

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Moreover, the Securities Law 2019 also provides a basis for improving the effectiveness, efficiency of management, supervision and enforcement, protecting the legitimate rights and interests of investors, and increasing the trust in the market, thereby, to encourage organizations and individuals from all economic sectors and people of all classes to invest and operate in the securities market, creating a medium and long-term capital mobilization channel for the economy, contributing to raising the level of Vietnam's securities market and meeting the requirements of deepening international economic integration and development in the new situation.