A trio of policies to improve securities transparency

To amend and supplement the Securities Law, the draft proposes three policies, with the first being enhancing transparency and efficiency in securities issuance and offerings.

Le Van Duong, counsel, Bizconsult

The policy includes public bond offerings, shares, and private bond offerings, protecting the legal rights and interests of investors, especially small investors, and preventing fraud when securities are introduced into the stock market. This will create new advantages for the stock market to grow, enabling the government and businesses to mobilise long-term resources at reasonable costs for the development of their production and business, thus promoting economic growth.

The policy’s content includes standardising the conditions for securities offerings for different types of securities, amending and supplementing regulations on public securities offerings, and revising regulations on public companies in the Securities Law.

The proposed solutions include amending Article 11 by adding a requirement that companies with contributed charter capital exceeding $4 million must have a minimum operating period of two years. For individuals, the amendments will include requirements of having participated in securities investments for at least two years, with a minimum of 10 transactions per quarter in the last four quarters, and possessing an annual income of at least $40,000 in the last two years.

Additionally, the draft proposes amending Clause 2 of Article 15 to exclude the requirement for at least 70 per cent of the offered shares to be sold in the case of a public offering aimed at raising capital for a project. Amendments to Clause 1 of Article 32 are also proposed, requiring that companies not only have contributed charter capital but also have shareholder equity of at least $1.25 million.

According to the Ministry of Finance (MoF), these solutions address urgent issues from practice, such as bond issuance activities and the responsibilities of organisations and individuals involved in issuance documentation, helping to remove obstacles and bottlenecks, thereby fostering growth, controlling inflation, and ensuring macroeconomic stability. The solutions will not generate additional costs for state management activities and will not affect state budget revenue.

For businesses, these measures will enhance transparency in capital raising and business operations, facilitating the mobilisation of funds for production and business development, contributing to increased state budget revenue.

The second policy would further improve regulations to enhance supervision and strict handling of fraud and manipulation in securities issuance and offerings, aimed at increasing the accountability of related organisations and individuals, ensuring the effectiveness of prevention and addressing violations in the stock market.

The policy will include legalising stock market manipulation behaviours to ensure consistency between the 2019 Securities Law and the 2015 Penal Code, amended in 2017, in defining such behaviours, providing higher legal validity for handling stock market manipulation.

The draft proposes adding Article 9a, which clarifies the responsibilities of organisations and individuals involved in preparing and submitting documents related to securities and the stock market. This includes those submitting documents or participating in preparing these documents, organisations receiving and reviewing them, advisory organisations, approved audit firms and auditors signing audit reports, valuation companies and appraisers, underwriting organisations, and individuals certifying the documents.

A new Article 31a is also proposed, regulating the suspension or cancellation of private securities offerings in line with public offerings.

The MoF believes these measures will address urgent practical issues such as the suspension or cancellation of offerings that do not comply with legal regulations, stock market manipulation, and more. These measures will enhance supervision, mitigate risks, and improve deterrence, ensuring the order, safety, and transparency of the market. The measures will not increase state management costs or impact state budget revenue.

The third and final policy covers improving regulations to remove practical obstacles and promote the development of the stock market with the aim of upgrading its status.

The MoF notes that one of the key issues to resolve for Vietnam’s stock market to be upgraded is the requirement for foreign investors to have sufficient funds when placing trade orders. To address this, the MoF is developing amendments and supplements to four circulars, which will remove the requirement for foreign institutional investors to have sufficient funds when placing purchase orders for shares.

However, this is only an immediate solution to meet the criteria for upgrading and will only apply to stock purchase transactions by foreign institutional investors.

In addition, according to assessments by international organisations, market participants, and major foreign institutional investors, Vietnam must continue to address remaining barriers and improve market quality to maintain and achieve a higher ranking. This includes implementing a central counterparty clearing mechanism for the underlying stock market in line with international practices.

In the long term, to develop a safe, efficient, and sustainable stock market aligned with international practices, it is necessary to implement longer-term solutions. One of these is to modernise the infrastructure, comprehensively and synchronously upgrading the technology for trading, registration, depository, clearing, and settlement in the stock market, including the implementation of central counterparty mechanisms for clearing and settling transactions.

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