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Official Gazette

Monday, September 26, 2022

Perfecting the legal framework for the securities market

Updated: 08:50’ - 27/04/2011

* The State Securities Commission (SSC) is finalizing a draft decree to guide the amended Securities Law which will take effect this July.

According to the 122-article draft, if a public company wished to list shares on bourses, it must not only have profit records for two consecutive years as currently required, but its return on equity (ROE) ratio must be at least five per cent in the year prior to the listing.

A company that wants to list its shares on the Hanoi Stock Exchange (HNX) would be required to have a charter capital of at least VND 30 billion, up three times from the current VND 10 billion. For the Ho Chi Minh Stock Exchange (HoSE), the country’s biggest bourse, the new requirement is VND 120 billion, up 150 per cent from VND 80 billion.

In addition, to be listed on the HoSE, a pubic company must have at least 20 per cent of its voting shares held by at least 300 private shareholders. For the HNX, the figures are 15 per cent and 100 private shareholders, respectively.

In case a domestic public company wishes to list its shares on a foreign bourse, apart from requiring the company to reach requirements of the foreign stock exchange, the draft decree also stipulates that either the exchange or its market watchdog should have inked a cooperation agreement with the SSC or a local bourse.

The draft decree goes on to stipulate that overseas listed depository receipts (DRs) would not be allowed for listing and trading in Vietnam, unless their listings in foreign exchanges are cancelled for some reasons. 

The draft decree, for the first time, governs real estate investment funds, which are defined as funds in either open-end or closed-end form that offer securities to the public to raise capital for investment in the real estate sector. At least 65 per cent of real estate fund certificates must be floated on bourses. In addition, the funds must be managed by fund management firms under the monitoring of supervising banks.

No less than 65 per cent of the funds’ total asset value must be invested in real estate projects. The remaining 35 per cent should be invested in listed securities, monetary market instruments and government bonds so as to assure liquidity, the draft decree says.

The decree is expected to be issued before July 1, 2011, the effective date of the amended Securities Law. Once enacted, it would replace Decrees No. 14/2007/ND-CP, No. 84/2010/ND-CP and No. 01/2010/ND-CP. Firms which are subject to previous regulations will have five years to meet the new decree’s requirements. 

* The SSC is also working on a draft circular guiding transactions in the securities market.

However, the draft paper, which aims to introduce new trading instruments for the local market, does not mention the shortening of the settlement period to two days (T+2) from the current three days (T+3) as expected by investors.

The circular, which has been drafted by the SSC since 2010 and is expected to be completed within 2011, previously planned to guide the development of three new instruments, comprising T+2, same session buying and selling stocks and trading on margin accounts. These instruments are currently banned in Vietnam as they can cause high risks for the fledgling market.

According to a SSC source, the reason for rejecting T+2 was that the current settlement agent system, including clearing institutions and brokerage firms, were not professionally capable to provide for safe T+2 transactions.

* In another attempt to facilitate the payment of personal income tax on incomes from securities investment, the Ministry of Finance (MoF) would discover a single payment method applicable to all securities investors.

According to Deputy Minister of Finance Do Hoang Anh Tuan, this amendment would be included in a bundle of changes to the Personal Income Tax Law which the MoF has officially proposed for incorporation into the National Assembly’s 2012 law-making program.

Currently, there are two tax payment options for securities investment. They are 0.1 per cent tax for gross sales or 20 per cent tax on net profits.-

VNL_KH1 

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