SSC is failing its crucial market supervision job

The SSC has been urged to help get the market into order

The basting of the regulator came via a report looking into Vietnam’s supervision of its economy which was put out by the National Assembly’s Economic Committee (NAEC) last week.

The NAEC report said the supervisory skills of the State Securities Commission (SSC) were “weak,” while the agency’s staff had not been trained in a methodical manner about supervision.

According to the NAEC’s Criteria of Financial Supervision report, the watchdog’s supervision activities were based solely on periodical reports and extraordinary reports submitted by exchanges.

That was why the SSC could only sniff out simple violations like unfulfilled information disclosures or transaction rule violations “which are easy to see”.

Meanwhile, sophisticated violations like inside trading and price manipulation, which required close analysis and observation, slipped under the agency’s radar. “The inspections and punishments for serious violations like inside trading and market distortion were mainly generated from complains [made by market participants],” stated the report.

The NAEC also claimed the watchdog was unable to ensure the obedience of market participants. The report specifically cited the SSC’s failure to separate money held by brokerage firms from that of the firms’ customers.

The NAEC evaluation of the role of the SSC comes amid rising criticism the market watchdog has failed to safeguard investors’ interests. With the financial market marred by instances of frauds and brokers’  insolvency, the SSC has been accused of being next to useless when it comes to warning investors about potential risks. Observers have also criticised the watchdog’s efficiency in dealing with such risks.

Things came to headline  again recently when local brokerage SME Securities became insolvent. Investors only realised  SME’s situation after the brokerage actually failed to settle its transactions.

The SSC, meanwhile, made almost no comment about SME’s ailing financial health in the lead-up to the crisis, and said afterwards only that SME must take full responsibility for losses.

Criticism of the watchdog was even more stinging as part of the blame for the current rash of insolvent brokerages has been laid at the feet of the SSC for its failure to supervise brokerages’ lending to investors at high-leverages in the past.

The NAEC report indicated that SSC’s weak supervision of the securities market was in line with the common characteristics the regulatory regime in Vietnamese financial market which failed to deal with potential risks.

Meanwhile, risks generated on the financial market are becoming even more sophisticated given the speedy development of market entities’ operations, emphasised the report.

“In particular, there has no macroeconomic supervisory body with enough competence and ability to warn about, prevent and effectively deal with the risks of the nation’s financial regime,” stated the report.

The report also pointed out the problematic nature of a restructure of those supervisory agents, given the fact that agents like SSC and the State Bank were playing dual roles as licencing market entities and punishing those same entities.

This led to “conflict of interest and reduced efficiency and power of supervision,” said the NAEC
The report proposed the government give more competencies to the SSC to enhance the watchdog’s ability, and also called for equipping the watchdog with the necessary tools to do its work.

The NAEC report, will be submitted to lawmakers to boost supervision in the local financial market.