Tighter measures to protect investors.

After half a decade since its enactment, the Securities Law is being planned for amendment by the Ministry of Finance in the draft law amending several articles of 7 laws.

Adding a layer of protection for investors.

One of the most significantly revised aspects of the Securities Law is the provision aimed at ensuring transparency of information regarding transactions and "goods" on the exchange, thereby adding multiple layers of protection for investors. This includes specific regulations outlining the responsibilities of organizations and individuals submitting or participating in the preparation of documents and reports, with the goal of improving the quality of information provided to investors.

The bill also includes insider trading of shares as a prohibited act. Specifically, transactions by insiders of public companies, public funds, and related parties that do not disclose information about planned transactions of shares or public fund certificates will be prohibited.

Simultaneously, the law codifies regulations on securities market manipulation from Decree 156/2020/ND-CP. Specific acts listed include buying or selling securities in controlling volumes at the market opening or closing times to create a new opening or closing price for that security; placing buy and sell orders for the same security on the same trading day; or colluding to buy and sell securities without resulting in actual transfer...

The criteria for becoming a professional investor have also been supplemented with the requirement to participate in securities investment for a minimum of 2 years with a minimum trading frequency of 10 times per quarter in the last 4 quarters. A minimum income of 1 billion VND/year must be maintained for the last 2 years.

Explaining this change, Mr. Hoang Van Thu, Vice Chairman of the State Securities Commission, said that adjusting the standards for professional investors in the Securities Law is very urgent. Therefore, it is necessary to improve the quality of investors, especially in terms of risk assessment ability and understanding of businesses.

However, the Bill also adds provisions for professional securities investors, including foreign institutional and individual investors, thus expanding the scope of this group of investors.

Controversial views on the central counterparty clearing model (CCP)

In this revision of the Securities Law, one of the notable amendments relates to point a, clause 4, Article 56 concerning the members of the Vietnam Securities Depository and Clearing Corporation (VSDC), clarifying that commercial banks and branches of foreign banks can be clearing members in both the derivatives market and the underlying securities market.

According to representatives from the Ministry of Finance – the agency drafting this bill – during the development of Decree No. 155/2020/ND-CP and Decree No. 158/2020/ND-CP, the consensus regarding clearing members was that clearing members (including securities companies, commercial banks, and branches of foreign banks) are allowed to clear and settle securities transactions on both the underlying securities market and the derivatives market.

Specifically for clearing members that are commercial banks or branches of foreign banks, when clearing and settling securities transactions on the derivatives market, they may only do so for that specific commercial bank or branch of a foreign bank.

"However, during the implementation of the CCP mechanism, there were differing interpretations between the banking and securities sectors regarding whether commercial banks and branches of foreign banks should be allowed to act as clearing members in the underlying securities market," the drafting agency stated.

This is why amending and supplementing the regulations at point a, clause 4, Article 56 is necessary to ensure a unified understanding. This will allow commercial banks and branches of foreign banks to perform clearing and settlement of transactions in both the underlying and derivative markets.

However, at the meeting to review the draft Law amending and supplementing several articles of seven laws, chaired by the Ministry of Justice , the State Bank of Vietnam proposed that commercial banks and branches of foreign banks only conduct clearing in the derivatives market. The reason is that participating in clearing in the underlying market would create many risks in the relationship between banks and affect their liquidity.

In fact, one of the two biggest obstacles in FTSE Russell's decision to upgrade the Vietnamese stock market from frontier to emerging market relates to clearing and settlement operations, the transfer of counter-payments, and the handling of failed transactions. The solution to these requirements is to apply the CCP model.

Because this model cannot yet be implemented due to the need to adjust regulations on the operation of custodian banks, the current solution is for securities companies to provide payment support for foreign institutional investors (NPS).

However, in the long term, this issue still needs to be fully resolved through the CCP (Closed-Cost Partnership) model so that VSDC can become the buyer of all sellers and the seller of all buyers. According to Mr. Nguyen Son, Chairman of the VSDC Board of Members, the key to this is completing the legal framework so that banks can be direct clearing members in the underlying market.

Source: https://baodautu.vn/sua-luat-chung-khoan-siet-chat-hon-de-bao-ve-nha-dau-tu-d223258.html