Amended Securities Law: Expanding market access for foreign investors

09:36 | 18/02/2020 Economy

(VEN) - The amended Law on Securities will take effect on January 1, 2021. With strict regulations on managing transactions, monitoring private share issuance and ensuring quality of information disclosure, the new law is expected to improve the quality of the securities market and enhance its upgrade.

expanding market access for foreign investors

Enhancing quality

The amended Law on Securities contains 10 chapters and 135 articles regulating activities in the securities sector, rights and obligations of individuals and organizations, the operation of the securities market, and governmental management of the sector. Private share issuance and sale of non-public companies must comply with the Law on Enterprises and relevant rules.

The new law tightens the conditions for initial public offerings (IPOs) in order to improve the quality and stability of securities and to be compatible with international practices. Under the law, a company needs to be profitable in the two years preceding the IPO registration. At least 15 percent of the voting stock of the issuing organization must be sold to at least 100 investors who are not major shareholders, and 10 percent to those with chartered capital of more than VND1 trillion. Major shareholders of the issuing organization must undertake to collectively hold at least 20 percent of the chartered capital for one year after the end of the offering.

In addition, new conditions restrict the transfer of securities for at least three years for a strategic investor and one year for a professional securities investor counting from the completion date of the offering.

Under the amended Law on Securities, the prime minister is empowered to decide on the operation and organization of the Vietnam Stock Exchange, which will be the highest-level market regulator.

The merger of the Ho Chi Minh and Hanoi stock exchanges will not be executed in the near future. The two exchanges will keep operating separately and work as member companies of the Vietnam Stock Exchange.

Improving investor confidence

Trinh Hoai Giang, deputy general director of the Ho Chi Minh City Securities Corporation (HSC), said the amended Law on Securities will benefit the development of the Vietnamese securities market. As member companies of the Vietnam Stock Exchange, the Ho Chi Minh Stock Exchange will be tasked with focusing on stock transactions, while bonds and derivatives will be carried out in the Hanoi Stock Exchange. This is a logical and necessary separation for the professional development of the market, facilitating the work of securities companies and investors, Giang said.

The new law also gives more powers to the State Securities Commission in order to enable it to inspect, supervise, monitor and enforce market regulations, improving fairness and transparency. This is an important factor to attract additional investors.

Experts recommend that market participants raise their awareness of compliance with the law. Regarding businesses, the relationship with domestic and foreign investors should be improved, while reports, documents, legal documents and information must be published fully in Vietnamese and English. Investors need to avoid using inside trading information in investment activities in order to manipulate stock prices.

Dr. Bui Quang Tin from the Banking University of Ho Chi Minh City said the amended Law on Securities has a number of new points to help the Vietnamese securities market improve quality and transparency, contributing to developing the market in a healthy manner.

Ngoc Thao