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Amendment of Securities Law: Towards a sustainable and transparent market

19:33 | 05/11/2018

VCN- With the change in both quantity and quality of the stock market in Vietnam, the amendment of the current Securities Law is an urgent requirement to standardize the conditions of offering, protecting the interests of investors and private investment is expected to contribute to upgrading the stock market in the coming time.

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The draft Law on Securities has 10 chapters, 137 articles. Photo: Internet

Creation of a more appropriate legal framework

Effective from 2006, after 13 years of implementation, the Law on Securities has promoted its role and effectiveness, supporting the stock market with clear progress both in terms of quantity and quality, contributing positively to development of the country, especially the role of mobilizing medium and long-term capital for the economy as well as enterprises.

According to data from the State Securities Commission, if in 2006, there were only 200 enterprises in the market, by the end of July, there were about 1,509 listed companies registered for trading. According to many experts, the diversity of goods in the market is not only positive, but also the difference in the size and quality of goods makes the opportunities of business more or less dispersed.

Mr. Nguyen Quang Viet, Director of Legal Department, State Securities Commission, said that the current Law on Securities and many implementing documents have created a relatively uniform legal framework, adjusting all activities, bringing a Stock market boom. However, there are many new issues, many regulations are no longer appropriate, which requires the Securities Law to amend the Securities to promote it to be more stable, sustainable and with more transparency.

It is urgent to set up a suitable legal framework that will not only create conditions for businesses to raise capital for business development; more importantly, it protects the interests and builds trust for enterprises to invest. The promotion of conditions of public offering, conditions of issue, or conditions for public companies does not mean that market development is not in terms of breadth, but rather to focus more on development of depth, towards a sustainable, transparent stock market.

Ha Dong Group said that the amendment of the Law on Securities is a prerequisite for the legal basis for most activities in the financial market - securities, helping the market become more transparent.

Minimize risk for investors

The draft Law on Securities has 10 chapters, 137 articles. There are important amendments relating to: securities offering, public company and information disclosure. In addition, the draft Law also has many new noteworthy regulations such as improving issuance conditions, raising the value of shares and reducing risks for investors when contributing capital to enterprises. Notably, the minimum chartered capital of the initial public offering of shares will triple and the offering of bonds to the public is 30 times higher than the current law.

According to the draft law, in order to offer securities to the public, the enterprise must ensure charter capital at the time of registration of the offering of at least VND 30 billion, increasing 3 times compared with the current regulation of 10 billion VND. In particular, the business must have business activities of two consecutive years of previous profits, and at the same time, no accumulated losses up to the year of registration of the offer.

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Mr. Nguyen Quang Viet said that the above provisions of the Law are consistent with the regulations on the charter capital contributed by issuers at the time of registration of offering only 10 billion, but the current law is too low and is not suitable for the current market and it only requires a one year business operation that is also unsuitable. In fact, there were many losses in previous years or with volatile trading activities, the stability is not high.

According to representatives of Ha Do Group, this regulation has improved the conditions for issuing and raising the value of shares issued to the public, reducing risks for businesses when making capital contribution to enterprises.

Representatives of Saigon Securities Incorporated (SSI) also supported the regulation on raising public offering conditions as well as modifying individual offers and improving conditions for public companies. However, SSI should consider the criteria for identifying individual businesses as professional securities firms.

In addition, the draft law also stipulates that the value of additional shares issued at par value is not greater than the total value of outstanding shares at par value, unless there is an underwriting with a firm commitment.

"This is a new regulation that shows the efforts of the Ministry of Finance to manage risk in the stock market when the widespread issuance and collection of shareholders may affect the interests of enterprises, especially enterprises retail market," Ha Do Group said.

Thus, it can be seen that with the above regulations, the enterprises must have financial capacity and prove their ability to pay debts to be allowed to issue bonds to mobilize the bonds in the market, contributing to enhancing the prestige of financial market participants.

According to Bao Viet Securities Company (BVSC), the finalization of the amended and widely publicized Securities Law will help investors assess the possibility that Vietnam will be considered for upgrade by MSCI and FTSE as an emerging market in the near future. High capability of the revised Securities Law will address the outstanding issues raised in the FTSE and MSCI Annual Report.

"Typically, the name of Vietnam Securities Depository Center is changed into Vietnam Securities Depository and Clearing Company, operating under the model of limited liability company or joint stock company. In addition, the provisions on the 49% foreign ownership limit for companies operating in occupational groups are not governed by specialized law or by international treaties to which Vietnam is a party has been removed in the draft Law on Securities this time," BVSC said.

By Bao Minh/Bui Diep