New securities regulations in the pipeline
by Legal Forum
The State Securities Commission is finalising draft regulations under the Law on Securities, to take effect this July.
Under the draft, a public company seeking to list shares on one of the nation's stock exchanges would not only be required to submit profit records for two consecutive years as currently required, but maintain a return-on-equity (ROE) ratio of at least 5 per cent in the year prior to listing.
A company that wants to list its shares on the Ha Noi Stock Exchange would be required to have charter capital of at least VND30 billion (US$1.4 million), triple the current VND10 billion ($476,190). For the HCM City Stock Exchange, the threshold would rise to VND120 billion, up 150 per cent from the current VND80 billion.
To be listed in HCM City, a company would also be required to have at least 20 per cent of its voting shares held by at least 300 private shareholders. For Ha Noi, the figures would be 15 per cent and 100 private shareholders, respectively.
In case a domestic public company wishes to list on a foreign bourse, the draft decree would require that the foreign exchange or its market watchdog have a co-operation agreement in place with a local bourse or the State Securities Commission. The draft decree would also ban overseas-listed depository receipts (DRs) from being listed or traded in Viet Nam.
The draft decree would, for the first time, govern 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 would be required to be floated on bourses. In addition, the funds would have to be managed by fund management firms under the monitoring of supervising banks.
No less than 65 per cent of the funds' total asset value would have to be invested in real estate projects. The remaining 35 per cent could be invested in listed securities, money market instruments and government bonds so as to assure liquidity.
The new decree is expected to be issued before July 1, the effective date of the amended Law on Securities. 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 would have five years to meet the new decree's requirements.
The State Securities Commission is also working on a draft circular to guide transactions in the securities market. The draft, which would aim to introduce new trading instruments on the local market, would not shorten the settlement period from three days (T+3) to two days (T+2), as many investors have been urging, along with margin trading and the ability to buy and sell shares in the same session.
According to a commission source, the reason for rejecting T+2 was that the current settlement system, including clearinghouses and brokerage firms, were not professionally capable to provide for safe T+2 transactions.
The Ministry of Finance is also trying to come up with a system to facilitate tax payments by securities investors. According to Deputy Minister of Finance Do Hoang Anh Tuan, the ministry has proposed a bundle of changes to the Law on Personal Income Tax for incorporation into the National Assembly's 2012 legislative agenda. Currently, there are two tax payment options for securities investment: a 0.1-per-cent tax on gross securities transactions, or a 20-per-cent tax on net gains. — VNS