Achievements in Defining Goals, Building Strategies and Planning for Stock Market Development

complaints, denunciations

- State audit is an inspection activity to determine the correctness and legality of documents, accounting data, and financial statements of state agencies, public service units, economic units, and organizations using the state budget.

On June 29, 2006, the National Assembly passed Securities Law No. 70/QH11, effective from January 1, 2007, consisting of 11 chapters and 136 articles, comprehensively regulating activities on the stock market; including Chapter 9 on Inspection and Handling of Violations. This is the highest legal document for conducting inspection and supervision of activities on the stock market.

The State Securities Commission Inspectorate coordinated with the Ministry of Public Security to develop Joint Circular No. 46/2009/TTLT-BTC-BCA on guidance on coordination in handling violations of the law in the field of securities and securities market (issued on March 11, 2009).

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Regarding the supervision of the State Securities Commission over the activities of the Stock Exchange and the Securities Depository : according to Clause 1, Article 8 of the Securities Law and Clause 5, Clause 6, Article 2 of Decision 63/2007/QD-TTg dated May 10, 2007 (stipulating the functions, tasks, powers and organizational structure of the State Securities Commission) of the Prime Minister, the responsibilities of the State Securities Commission are stipulated as follows: The State Securities Commission is no longer the "superior" unit to the Stock Exchange and the Securities Depository as before, but plays the role of a management agency for the securities activities of the Stock Exchange and the Securities Depository. On July 23, 2009, the Minister of Finance signed and issued Circular No. 151/2009/TT-BTC guiding the supervision of the State Securities Commission over securities activities of the Stock Exchange and the Securities Depository Center to specify the contents of the State Securities Commission's supervision of these "special" enterprises.

In the first phase focusing on the construction and development of the stock market, there were two main documents on stock exchange supervision activities : Circular 38/2007/TT-BTC dated April 18, 2007 of the Ministry of Finance guiding the disclosure of information on the stock market, regulating the obligations to disclose information of market members when participating in holding and trading stocks; Decree 36/2007/ND-CP dated March 8, 2007 of the Government on administrative sanctions in the field of securities and stock exchange. After this phase, on December 31, 2008, the Ministry of Finance issued Decision No. 127/QD-BTC on promulgating the Regulation on Supervision of Stock Exchanges on the stock market to create a legal framework for the supervision activities of the State Securities Commission on stock exchanges. According to this document, the stock exchange supervision system is organized

organized into 2 levels: the Stock Exchange supervises securities trading activities at the Stock Exchange and the State Securities Commission supervises trading activities, providing securities trading services in the entire market, including the activities of the Stock Exchanges, Securities Depository Centers, listed companies, securities companies, securities investment management companies, securities investment funds, securities investment companies, practitioners, investors and other related organizations.

Based on the prescribed functions and tasks, the Ministry of Finance, the State Securities Commission, and the Stock Exchanges have inspected and supervised the stock market from input to output of securities trading and business activities on the market.

- The Minister of Finance has issued a system of financial monitoring indicators for securities companies and fund management companies, including three groups of indicators (assessing general activities such as capital sources, income growth rate, competitiveness; assessment of profits; assessment of payment capacity). This system includes ten indicators for monitoring securities companies and six indicators for monitoring fund management companies. This is a tool for the State Securities Commission to monitor, inspect, and supervise the business activities and compliance with securities laws of securities companies and fund management companies. Through this, policies can also be formulated to develop the stock market, early detect and forecast errors that may arise.

- The Ministry of Finance directs to strengthen supervision of the activities of listed companies, securities companies, and fund management companies, and supervise transactions conducted at stock exchanges; pay special attention to supervising investment funds, which must register and disclose information in accordance with the provisions of the Securities Law.

- The State Securities Commission conducts regular and irregular inspections of the Stock Exchanges and Securities Depository Centers. In addition, it strengthens coordination and supervision among units under the State Securities Commission; the Stock Exchanges and Securities Depository Centers as well as strengthens decentralization and delegation of authority to supervise and inspect members in the market.

- From the lessons of the Asian financial crisis, the Government believes that it is necessary to manage foreign capital flows into Vietnam. Many economists have given the opposite but completely correct lesson: opening the capital market will sometimes cause adverse effects, and the Government can use capital controls as regulatory tools to develop the country and maintain stability. A typical representative of this view is Nobel Prize-winning economist Joseph Stiglitz, former Chairman of the Council of Economic Advisers under President Bill Clinton, who was also Director of the World Bank (WB) during the crisis. In his reply

In a recent press interview, when asked about the risks in Asian stock markets, Stiglitz said that capital controls are now common in emerging markets, and in many cases, they are a good thing: “Both China and India do not allow capital to flow out without government intervention. The effect of this is to prevent people from pouring money in and then pulling it out overnight. Such measures are aimed at limiting short-term investment and capital withdrawal from Vietnam. This will help stabilize capital flows.”

- The Ho Chi Minh City and Hanoi Stock Exchanges have deployed a new trading and monitoring system to more closely monitor unusual information and illegal transactions in the market. Unreported public issuance of shares; undisclosed internal shareholder transactions; insider trading, etc., are typical violations in the stock market that have been discovered recently. The monitoring system is still manual and the penalties are light, allowing violations to still "live".

According to the representative of Hanoi Stock Exchange (HNX), as of December 2009, HNX discovered more than 17,000 cases of simultaneous buy and sell orders of the same stock code in a trading session, of which 70 securities companies were required to explain and report to the State Securities Commission with more than 330 cases of matched buy and sell orders in the same session. HNX also monitored 484 transactions of 280 major shareholders and discovered 38 cases of violations of information disclosure; more than 155 cases of violations of information disclosure when trading by internal shareholders... All violations were reported to the State Securities Commission.

To improve management efficiency, HNX is upgrading its monitoring software to create a unified and centralized database, overcoming the current shortcomings due to the lack of a database. By deploying software to standardize input information (financial reports; periodic, irregular, and on-demand information disclosure), it aims to reduce report processing time and thereby reduce information disclosure time. This software has been deployed to more than 130 listed companies in 2009. HoSE's goal is for 100% of listed companies to apply this software in 2010 and to apply it to member securities companies. Therefore, it will be easier to compile statistics, violations, and create warnings. With this deployment, illegal transactions will be fully detected.

- The Securities Depository Center has started to monitor sub-accounts, which will also help detect violations in transactions. In 2010, this agency will further strengthen the management and supervision of market activities by stepping up the implementation of supervision, inspection, and handling of a number of market members and individuals who violate the law. The State Securities Commission conducts regular and irregular inspections of the Stock Exchanges and Securities Depository Centers. In addition, it will strengthen the coordination of supervision between units under the State Securities Commission, the Stock Exchanges, and Securities Depository Centers, as well as enhance decentralization and authorization of supervision and inspection of market members.

2.3. ASSESSMENT OF THE CURRENT STATE OF STATE MANAGEMENT OF VIETNAM'S STOCK MARKET

2.3.1. Achievements

2.3.1.1. Achievements in defining goals, building strategies and plans for stock market development

Firstly , realizing the importance of defining goals, building strategies and development plans, the Government, the Ministry of Finance and the State Securities Commission have fully implemented the contents of planning work, creating a basis for implementing the next steps of work for the stock market.

Second , the content of the objectives and plans for stock market development are truly the guiding principles for state management activities and stock market development. From the beginning, the management agencies have accurately identified the objectives of state management as developing the stock market in terms of both scale and quality in accordance with the actual conditions of Vietnam, becoming a medium and long-term capital mobilization channel for the country's economic development, maintaining order and safety, strengthening market supervision and management, and protecting the legitimate rights and interests of investors.

Ten years is not a long time, from the first trading sessions with only 2 stocks until the world economy went into recession, the domestic economy had not recovered, according to the State Securities Commission, the average trading value in 2009 reached 3,000 billion VND/session, an increase of more than 7 times compared to the first quarter of 2009, nearly 4 times higher than the average in 2008. Especially in October and November 2009, the trading value reached an average of 4,000 billion VND/session, of which October alone reached an average of 6,000 billion VND/session. The capitalization value at one point reached 55% of GDP, exceeding the target set for 2010. The achievements of the Vietnamese stock market were thanks to the right target orientation from the beginning and perseverance in the face of difficulties, thus saving the country's time and resources.

The goals and plans were specified over time and changed to suit the market fluctuations from 2003, 2005 and 2007. By Decision 128/2007/QD-TTg, the Government had a more comprehensive view: placing the development of the stock market in synchronous development with the monetary market, this is a progressive awareness that is worthy of respect, assessing the maturity in State management of the stock market.

Third , the State Securities Commission has concretized the goals and directions of the Government and the Ministry of Finance through the State Securities Commission's Action Program in 2005. This is an effort by the State management agency to perform well its planning function, but unfortunately this activity has not been carried out regularly in the following years.

2.3.1.2. Advantages of the legal framework regulating Vietnam's stock market

Firstly , Securities and Stock Market is a new field but has formed a complete system of legal documents covering all aspects of market activities, specifically including:

- Securities Law No. 70/2006/QH11 and Decrees guiding the implementation of the Securities Law

- Documents on strategies and plans for stock market development such as Decision 163/2003/QD-TTg (Strategy for developing Vietnam's stock market to 2010); Decree 144/2003/ND-CP of the Government (on securities and stock market); Decision 37/2005/QD-UBCKNN (on promulgating the Action Program of the SSC to develop the stock market in 2005); Decision 898/2006/QD-BTC (promulgating the Plan for developing Vietnam's stock market 2006-2010); Decision 128/2007/QD-TTg (on approving the Project for developing Vietnam's capital market to 2010 and vision to 2020)

- Regulations on the organization of the stock market apparatus such as: Decision 112/2009/QD-TTg (Regulating the functions, tasks, powers and organizational structure of the State Securities Commission under the Ministry of Finance); Decision 171/2008/QD-TTg (on the establishment of the Vietnam Securities Depository); Decision 1354/2009/QD-BTC (on the promulgation of the Charter on Organization and Operation of the Hanoi Stock Exchange)...

- Documents on inspection and supervision such as Decision 49/2008/QD-BTC (on amending and supplementing Decision No. 02/2008/QD-BTC dated January 14, 2008 of the Minister of Finance stipulating the tasks, powers and organizational structure of the Boards, Offices, Representative Agencies and Inspectorate of the State Securities Commission); Decision 02/2008/QD-BTC

BTC, Decision 96/2005/QD-BTC (prescribing the functions, tasks, powers and organizational structure of the State Securities Commission Inspectorate)...

- Regulations on administrative sanctions include Circular 46/2009/TTLT-BTC-BCA (Joint Circular guiding the coordination in handling violations of the law in the field of securities and securities market); Circular 97/2007/TT-BTC (guidance on administrative sanctions in the field of securities and securities market); Circular 130/2004/TT-BTC (guidance on the implementation of a number of articles of Decree No. 161/2004/ND-CP dated September 7, 2004 of the Government on administrative sanctions in the field of securities and securities market); Decree 161/2004/ND-CP (on administrative sanctions in the field of securities and securities market)...

- Regulations on equitization and foreign participation in investment in the stock market

- Regulations on securities companies, public companies; on information disclosure, registration, depository and payment...

The Securities Law and its guiding documents affirm that the system of Vietnamese legal documents in general and securities law in particular have matured and progressed; have created the highest, synchronous and unified legal framework for the operation of the securities market, basically eliminating contradictions and conflicts with other relevant legal documents; created a clear and transparent legal environment for business activities and securities investment; created an increasingly open investment environment for organizations and individuals of all economic sectors participating in investment and activities in the securities market, ensuring the autonomy of investors in the securities market.

Second , the State has issued, revised and perfected specialized legal documents on securities and securities market in a direction that is relatively close to the practical situation of securities market activities.

The Securities Law has created a fundamental legal basis for restructuring the stock market through the separation of the Stock Exchange and the Securities Depository Center into independent legal entities operating under the model of a limited liability company or a joint stock company. This provision increases the initiative in the operations of the Stock Exchanges and the Securities Depository Center, creating an independent role from the State management agency in organizing, managing and operating securities trading activities at the Stock Exchanges. Operating the stock market to register for trading unlisted securities - the Upcom market (for unlisted public company stocks, June 24, 2009), forming a specialized bond market (transferring 275 types of government bonds with a maturity of 6 months or more from HOSE to the Upcom trading floor).

The Securities Law has also created a legal basis for the development of a system of intermediary organizations operating in the securities market (securities companies, fund management companies, securities investment funds, custodian banks, etc.), facilitating business activities and securities transactions; in particular, the licensing procedures for the establishment and operation of securities companies and fund management companies have been shortened compared to before.

The securities legal system has also provided legal bases to protect the legitimate interests of investors, create a healthy competitive environment for enterprises, improve transparency, comply with auditing and initially comply with international practices on corporate governance. In addition, the securities and securities market legal system has created the necessary legal corridor for the State to perform the functions and tasks of managing and supervising the securities market.

Third , in general, the system of documents is consistent with international laws and practices, creating a foundation for the Vietnamese stock market to be able to integrate with regional and international capital markets according to Vietnam's integration roadmap in the Agreements and commitments with the international community; current regulations do not discriminate or treat domestic or foreign investors participating in investment in the Vietnamese stock market.

Fourth , enhance the transparency of organizations and individuals participating in market activities, especially public companies; improve the market management and supervision capacity of the State management agency on securities and securities market, creating a legal basis to strengthen State management work to ensure the interests of domestic and foreign investors and organizations participating in the market .

On Thursday , August 6, 2009, together with other sectors, the Ministry of Finance announced 67 administrative procedures in the securities sector, including 53 procedures under the State Securities Commission such as registration for public offering of shares, bonds of all kinds, issuance of shares to pay dividends, pay bonuses; proposal for separation, merger, conversion of securities companies; proposal for dissolution, relocation of securities companies; registration for establishment of representative offices, branches, representative offices abroad... and 14 procedures at stock exchanges, depository centers, and payment centers. These procedures create conditions for transparency in State management of the securities market. In 2010, according to the Prime Minister's opinion, ministries and sectors will have to reduce 10-30% of the number of announced procedures to create a breakthrough in administrative reform in the securities sector. These procedures create a legal basis for building

Establish a system of intermediary organizations operating in the stock market and professional investors including securities companies, fund management companies, supervisory banks, securities investment funds... to facilitate business activities and provide securities services; gradually improve the quality of operations of these organizations. In particular, administrative procedures in granting securities trading licenses are simpler and shorter than previous regulations.

It can be seen that in the State management of the stock market, the activity of creating a legal environment, although lacking, is the activity with the most effort. In a short period of time, legislators have completed a huge amount of work to create a legal framework for the activities of subjects in the market. The proactive construction of a legal framework before the establishment of a centralized stock market is both a characteristic of the legal environment of the Vietnamese stock market and reflects the difficulties and efforts of the National Assembly, legislative experts, and managers, both ensuring safety in the process of operating the centralized stock market, protecting the rights of participating subjects and building trust for the investing public.

After the stock market came into operation, the legal environment was created, and the shortcomings were further supplemented and the legal framework was gradually improved in line with the situation and requirements of the stock market's practical operations, gradually meeting better the requirements of publicity, fairness, transparency and ensuring the smooth operation of the market. It can be seen that the development and improvement of legal policies on securities and stock market in recent times have made an important contribution to building the market, ensuring that the activities of the stock market are focused on order and discipline, while providing the necessary legal basis for the State management to have a basis to manage and supervise the stock market in accordance with international practices and standards.

2.3.1.3. Advantages of organizing the State management apparatus for the Vietnamese stock market

Firstly , the Vietnamese government has proactively promoted and prepared the necessary conditions to establish a leading state management agency for securities and securities markets. In parallel with this work, preparations have been made regarding legal basis, material facilities and other necessary conditions to proactively establish a centralized securities market.

This also confirms that the Vietnamese Government has played the role of creating the stock market. In other words, the centralized stock market and the State management agency in Vietnam were formed from the "idea" of the State, not necessarily from the internal needs of the economy.

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