VCN –The 2006 Securities Law has been in effect since 1-1-2007. After nearly 10 years of existence, although the legal framework for the stock market has improved, and revised many times, it is also exposing some inadequacies that need to be modified and replaced.
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The legal framework for the stock market is exposing some inadequacies and problems which relate to other laws. Photo: S.T.
No longer consistent with reality
With 20 years of development so far, the stock market has built a legal framework, structure and relatively sufficient market size which is consistent with international regulations. The process of improving the stock market has had positive impacts on Vietnam stock market in many respects. Whereby the market capitalization is now 40% of GDP (about $US 77 billion) with over 1,000 listed companies, although it was just 0.3% of GDP at its very first day. The Stock market became one of the important channels for capital mobilization of the whole economy with a total value of capital from its inception to now reaching about 2 million billion VND, meeting about 23% of total social investment capital.
Not only unfreezing the domestic capital flows, the stock market also widens foreign investment flows. Until now, the total market value of the portfolio which is held by foreign investors was reaching $US 19.55 billion (up by 20.7% compared to the end of 2015). In particular, through the stock market, there are nearly 4,000 enterprises that have been equatized from 2001. For equatized and listed state owned enterprises, the total assets averagely increased by 12% / year, equity increased by 16% / year, profit rose about 8.6% / year.
The legal system of the stock market has been gradually improving, the legal effect of the management market document shave increasingly been enhanced, since the implementation of Decree 48/1998/ND-CP and now the 2006 Securities Law and the Law which amended and supplemented some articles of the 2010 Securities Law. However, the reality has shown that this legal framework has changed slower than the requirements of development and integration.
According to Mr. Nguyen Quang Viet, Legal Department, State Securities Commission, some of the contents of the current Securities Law no longer meet the practical requirements due to the growth of the Vietnam stock market with its diverse instruments, and more complex transactions. At present and in the future, with the development of the market, the more needs of investors, the deeper and wider international integration, the current provisions of the Securities Law is not sufficiently covering the practices, and in fact creating legal loopholes. It will also affect the rights and interests of the participants in the stock market as well as making difficulties for the management and supervision of State authorities.
According to representatives of Bao Viet Securities JSC, the Enterprises Law, the Investment Law and some mechanisms, policies have changed, so if we keep the current Securities Law, it will not have consistency, creating legal barriers, affecting the development of the stock market. On the other hand, our country has not carried out any amendment or addition to Laws relating to the stock market. The market arising problems which related to different sectors are addressed by sub-law documents instead of amending the relevant legislation. Thus, there are sub-law documents with conflicts, making the legal environment difficult and confusing for foreign investors.
Changing for integration!
In order to continuously develop the stock market and upgrade the market to compete with other countries in the region, adopting the changes of the market, especially in the context of deeper and wider international integration, the policy of perfecting the market is concerning to Government. This is expressed in Decision 252/QD-TTg of the Prime Minister dated 1-3-2012. Accordingly, one of the solutions for development of the stock market is finishing the regulatory framework and improving capacity management and supervision, particularly, submitting new Securities Law (replacing the current Securities Law) to the National Assembly for approval in the period of 2015-2020.
According to Mrs. Le Thi Thuy Van, Head of Market Development department, National Institute for Finance, the expectation of building a new generation of Securities Law in 2018 will ensure high consistency in the Vietnam law system with more detailed provisions on professional products, while ensuring maximum freedom of market participants.
To develop the stock market towards modernization and integration, Ms. Thuy Van said that we should improve the legal basis to attract the participation of foreign investors. In addition, we need to implement measures to improve the Vietnam stock market level. Besides, enhance the legality of disclosure information as a separate report establishment rather than a part of the annual report. On the other hand, the information disclosure regulations on environmental and community responsibilities should be specified in the circulars content, instead of in the annex.
Representatives of the Market Development Department, the State Securities Commission proposed that we need to immediately implement the derivatives market, diversify securities products and associate the equatization with registration/listing on the stock market; a derivatives market should be put into operation soon with three products such as futures contracts of HNX30 index, futures contracts of VN30 and futures contracts of 5-year government bonds. At the same time, significantly reduce the rate of State ownership in the sectors which do not need control, increase the participation of professional investors into the equatized State owned enterprises. Leaders of the Ministry of Finance expect that by mid-2017, the derivatives market will be open.
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Mr. Nguyen Quang Viet proposed, when constructing the new Securities Law, we should ensure competence for the State Securities Commission. At the same time closely coordinate between the State management agencies in perfecting the legal framework, the stock market operation, and monitoring and enforcement to ensure the safety for both the stock market and the national financial system.
By Thuy Linh / Tuan Cuong