Ministry of Finance: 'Strong hand' to remove barriers to the goal of upgrading the stock market

The Ministry of Finance has just officially sought opinions on amending many relevant legal regulations to remove some bottlenecks and meet the rating organization's upgrading criteria.

The proposal to amend legal regulations this time is one of the important solutions to implement the direction of the Government and the Prime Minister on actively implementing solutions related to the development of the stock market.

According to the leader of the State Securities Commission (SSC), the proposal to amend legal regulations this time is one of the important solutions to implement the policies and directions of the Government , the Prime Minister and the Ministry of Finance on actively implementing solutions related to the development of the stock market, including research to remove obstacles for foreign investors (FIIs), aiming to upgrade from a frontier market to an emerging market to attract investment capital, especially foreign investment capital.

Accordingly, among the issues that need to be improved to achieve the upgrading target, the two main issues are pre-funding and the requirement for equal and timely access to information of foreign investors, which can be handled through amending and supplementing a number of legal documents in the securities sector under the authority of the Government and the Ministry of Finance.

Removing the "bottleneck" of pre-transaction margin

The leader of the State Securities Commission said that after consulting with international partners and market members, the proposed solution is to allow qualified securities companies to provide services that do not require foreign investors to have 100% of the money before placing an order to buy securities, but only require foreign investors to have enough money before the time when the depository member must confirm the transaction results and payment obligations with the Vietnam Securities Depository and Clearing Corporation (VSDC). In case the foreign investor does not have enough money by the prescribed time, the payment obligations of the foreign investor will be transferred to the securities company (SC). However, to ensure feasibility and safety, the management agency proposes to only apply to foreign institutional investors (FIIs).

"This solution basically received consensus and feasibility assessment from market members and the World Bank, FTSE Russell" - The leader of the State Securities Commission informed.

This is considered to remove the biggest obstacle related to upgrading the Vietnamese stock market according to the criteria of the FTSE Russell market rating organization. This solution is also considered to help the trading mechanism of the Vietnamese stock market be similar to the trading mechanism of many stock markets in the world.

However, to reduce the risks that may arise for the market when implementing this service, the State Securities Commission has also proposed some contents related to the service users and applicable subjects.

Accordingly, the proposal to allow 100% margin-free transactions to be applied to foreign institutional investors (FIIs) and not to domestic investors still ensures fairness, because currently only domestic investors are allowed to use the service of borrowing money to buy securities (margin loans), while foreign investors are not currently allowed to borrow money to buy securities.

In addition, there are currently about 7.39 million securities accounts in the market, of which the number of foreign investor securities accounts is 45,384 accounts, including 4,551 foreign investor accounts. Although the number of foreign investor accounts accounts for only 10%, according to statistics on HOSE in the period from 2020 to December 31, 2023, the value of buying/selling transactions of foreign investors always reaches over 94% of the total transaction value of all foreign investors. Therefore, foreign investor is the main subject that needs to resolve the problem of upgrading the stock market.

The subjects provided with the service are Securities Companies (SCs) with good financial status, meeting the conditions for providing clearing and settlement services for securities transactions, and having sufficient limits to meet the payment for securities transactions of foreign investors using this service in case the foreign investors temporarily lose their ability to pay.

In addition, to minimize risks, the management agency also proposed to add regulations that in case a securities company invests beyond the limit due to providing trading services without depositing 100% of foreign investors' money, the securities company is not allowed to continue providing the above services until it complies with the investment limit according to current legal regulations.

Amendment 4 Circulars

Currently, regulations related to listed stock transactions, transaction registration; securities transaction settlement and securities company operations are stipulated in Circular 120/2020/TT-BTC, Circular 119/2020/TT-BTC and Circular 121/2020/TT-BTC. These regulations are currently being well implemented, ensuring stable and smooth securities trading, clearing and settlement activities on the stock market. However, in order to meet the upgrading goal and implement solutions to overcome the problem of pre-transaction margin requirements from foreign investors, the State Securities Commission proposes to amend and supplement some contents in the above documents.

Specifically, the management agency will amend and supplement Circular 120 to add regulations on foreign investors using non-margin trading services to place orders to buy securities without having enough money before placing the order.

Along with that, Circular 119 will be amended and supplemented to add regulations on handling cases where foreign investors using trading services without depositing 100% of the money are unable to pay, the payment obligation of the foreign investor will be transferred to the securities company where the investor places the order through the securities company's proprietary account.

In addition, Circular 121 will be amended and supplemented to add regulations on the operations and responsibilities of securities companies in trading and paying for securities transactions of foreign investors in cases where securities companies are provided with trading services without depositing 100% of money, as well as regulations on the application of investment limits of securities companies when performing this service.

In addition, Circular 96/2020/TT-BTC will be amended and supplemented to add regulations on exemption from the responsibility of pre-transaction information disclosure of insiders and related persons of insiders who are securities companies when the securities company performs payment obligations for transactions in which foreign investors use 100% non-margin trading services and are unable to pay.

'Anglicize' roadmap reports

A survey of the Vietnamese stock market shows that only about 10% of listed companies disclose information (CBTT) and financial statements in English, and most of these companies are large-cap companies. Therefore, some opinions say that forcing businesses to disclose information in two languages will have a big impact on businesses on the stock market, such as increasing costs, increasing human resources, making it difficult to meet accuracy and timeliness requirements, etc., thus affecting the compliance of businesses.

Therefore, in this proposal, the management agency will also build in the direction of considering and calculating the suitability and feasibility, both ensuring the upgrading goal and ensuring that businesses have a roadmap for implementation. More specifically, the management agency proposes to determine the list of public companies (POCs) that are required to comply with the English disclosure in the short and long term. Classify the comprehensive level of information that needs to be disclosed for small-scale POCs and large-scale POCs.

It is known that currently, the number of public companies as of December 31, 2023 is 1,733 companies, of which 1,069 are large-scale public companies with equity capital of VND 120 billion or more. Therefore, the English disclosure will be applied first to large-scale public companies for periodic information disclosure. Public companies with equity capital of less than VND 120 billion and extraordinary disclosure, upon request, will be implemented later according to the roadmap.

Specifically, it is expected that listed companies (CTNY) and large-scale public companies will periodically disclose information in English from January 1, 2025 and irregularly disclose information, upon request, in English from January 1, 2026. The remaining public companies will periodically disclose information in English from January 1, 2027 and irregularly disclose information, upon request, in English from January 1, 2028. In addition, the Stock Exchanges and VSDC must also disclose information in Vietnamese and English./.

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