SGDCK, over 340 listed companies, 100 securities companies, 42 fund management companies, 30 securities investment funds and many other organizations and individuals providing services related to securities transactions.
At the Ho Chi Minh City Stock Exchange , monitoring activities are still passive based on periodic reports from relevant entities and there is no synchronous coordination between internal units. Information processing based on actual transaction monitoring does not ensure time requirements, and related information is incomplete. Currently, the Ho Chi Minh City Stock Exchange has not systematically monitored rumors. Normally, if a rumor appears, the officer in charge of monitoring will collect it and send it directly to the relevant departments (Transaction Registration Management Department, Member Department) for verification. The collected information is not stored in the monitoring system as a database for analysis.
The personnel doing supervision work at the Ho Chi Minh City Stock Exchange currently only meet the requirements for monitoring transactions and supervising compliance with legal regulations related to securities transactions. With 7 staff in 2004 and 12 staff at the end of 2008, receiving income according to salary scale and not having received specialized training in supervision [47], it is inevitable that the effectiveness of securities transaction supervision at the Ho Chi Minh City Stock Exchange is still low.
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Third, the monitoring index system and monitoring software have not been built yet.
In fact, monitoring activities are performed manually, without technical assistance such as no chart system of each stock and no automatic warning system. For example, as shown below, if the automatic warning system is activated, the points the arrow points to will receive a warning signal [80].
Setting up the period- Sample
Mar ch 11 ex t end buyout of tr easur y stock
Feb16 pai di n capi t al i ncr ease
( 2,020,000 shares)
<The per i o d o f i nvest i gat i o n : 06. 10.
21~07 . . 4. 26>
<The per i od of i nvest i gat i on : 06. 10.
(Source: Korea Stock Exchange – www.ksx.kr )
Figure 2.1: Automatic warning signs that initiate the investigation phase
The securities trading monitoring system is not tight due to the lack of effective warning parameters, threshold values or trading patterns in each period. At the same time, the current system of indicators shows many overlaps and does not follow the actual requirements of monitoring activities. Calculating the average trading volume, trading value and bid/offer price difference in a certain period of time during the day or in a certain period of time (several days) and then comparing it with the previous period to calculate the absolute value or percentage will not be enough as a basis for analyzing a volatile security or an unusual trading behavior.
Fourth, it is not possible to integrate transaction data, information disclosure data, and securities registration, depository, and clearing data.
The new securities depository information system can only coordinate transaction monitoring on foreign investors' holding ratio, accounts that place both sell and buy orders in the same trading session. Therefore, intraday monitoring and multi-day analysis are very manual. The two-level depository system of the VSD also affects the monitoring ability of the SGD, because the VSD only manages securities deposited according to
Securities companies that do not manage each investor's account must go through the securities company to check the depository information and order book when conducting an inspection.
b. Objective reasons
First, the legal system is not complete.
After nearly 7 years of operation, since the opening of the Ho Chi Minh City Stock Exchange, the Vietnam Stock Exchange has just been regulated by the Securities Law (effective from January 1, 2007). Before the Securities Law was promulgated and took effect, the Vietnam Stock Exchange was regulated by Decree No. 48/1998/ND-CP (effective from 1998 to 2003) and Decree No. 144/2003/ND-CP (effective from 2003 to the end of 2006). In addition, there are many Codes and Laws regulating part of the activities of many different entities in the stock market such as banks, other non-bank financial institutions, enterprises operating in many fields in different industries. The system of related legal documents includes the Enterprise Law, regulations on equitization of state-owned enterprises, regulations on foreign exchange management, criminal law and other laws. The Ministry of Finance, the State Securities Commission, the Stock Exchanges and the Securities Trading Centers have also issued a number of regulations related to securities transactions such as regulations on listing conditions and information disclosure regulations.
Thus, for a long time, the state management agencies in Vietnam in the field of the stock market have mainly focused on market development, the stock market supervision has not been paid attention to and there have been no specific systematic steps to promote. In fact, Decision No. 31/1999/QD-UBCK issued on October 12, 1999, that is, before the secondary stock market came into operation, did not separate inspection and supervision activities, which was not feasible and had low effectiveness. Currently, the Regulation on supervision of securities transactions on the Vietnamese stock market issued in Decision 127/QD-BTC on December 31, 2008 of the Ministry of Finance has only been issued for 4 months and is still in the initial implementation stage. Other legal documents mainly serve the state management of market participants such as public companies (including listed companies); securities companies; Fund management companies, investment companies, self-governing organizations. However, these documents do not have regulations on supervision of owners.
can participate in securities transactions on the market, there is no process to monitor unusual transactions such as insider trading, market manipulation, the effectiveness and practical efficiency of these documents are still low.
Regarding penalties, the administrative penalty framework stipulated in Decree 36/2007/ND-CP dated March 8, 2007 is still low, maximum 70 million VND, not ensuring deterrence and prevention of violations. Recently, on April 2, 2008, the National Assembly Standing Committee passed the Ordinance amending and supplementing a number of articles of the Ordinance on handling administrative violations , accordingly, the penalty is from 10,000 VND to 500 million VND. However, Decree 36 of the Government on administrative penalties in the field of securities and the securities market is still in effect, the State Securities Commission is an agency under the Ministry of Finance, according to the provisions of the Law on Organization of the Government dated December 25, 2001, with limited authority to handle violations. Therefore, the fine of 500 million VND does not have specific sanctions for the State Securities Commission to apply in punishing violations within the scope of activities managed by the State Securities Commission. The 1999 Penal Code does not have specific provisions on crimes and penalties for activities in the securities market. The 2009 Penal Code (amended) also does not specifically include crimes of violating the law on the securities market, except for some provisions on causing serious consequences . According to the Joint Circular between the Ministry of Finance and the Ministry of Public Security No. 46/2009/TTLT-BCA dated March 11, 2009, causing serious consequences means causing great damage to property and non-material consequences (negatively affecting the implementation of the Party's guidelines and State policies; negatively affecting the fairness, publicity, transparency and safety of the securities market) as prescribed in legal documents on securities and the securities market or other legal documents regulating and guiding serious consequences. Thus, the concept of causing serious consequences has not been clarified [49], the determination of behavior and quantification of seriousness are not clear and specific.
Thus, after 9 years of operation, the legal framework regulating securities transaction supervision activities on the Vietnam Stock Exchange is still in the process of completion. The current system of legal documents is quite complete in terms of scope of regulation, but the content
The content still has many shortcomings, does not ensure discipline in the market, does not have a deterrent effect on violations, does not keep up with the rapid development of the market and the complexity of violations of the law in the stock market.
Second, the Vietnamese Stock Market is developing unstably, lacking sustainability and lacking compliance with regulations by the monitoring subjects.
Part of the reason for the limitations in securities trading supervision on the Vietnamese stock market as analyzed above is due to the characteristics of the Vietnamese stock market, manifested in the sharp increase in violations, manipulation by foreign investors and very low market efficiency.
Since 2006, the stock market has experienced a dramatic growth in size. Along with the expansion of the market, potential violations have increased significantly, so potential risks have also increased exponentially. The recent occurrence of internal information leaks, leading to insider trading, market manipulation, violations of information disclosure regulations and other violations of laws related to securities trading has shown this reality.
In addition to the positive impacts on the development of the stock market, the strong participation of foreign investors in the stock market also has negative aspects that can negatively impact the market. Since the market began to develop "hotly", there has been a phenomenon of domestic investors buying and selling following foreign investors, leading to the possibility of foreign investors leading domestic investors and manipulating the market easily. At the same time, the presence of foreign investors is also a challenge for the stock market supervision system. Currently, representative offices of foreign investors are established according to registration at local departments without going through the State Securities Commission, often operating beyond their functions and without management, supervision, and information reporting regime.
Considering the efficiency of the Vietnamese stock market, it can be seen that the centralized market is small in scale compared to the free market, so price intervention is quite easy. Violations of information disclosure still occur frequently, leading to a lack of transparency and fairness.
fairness and objectivity of information. In addition, because domestic investors are influenced by foreign investors, crowd psychology governs behavior, so stock prices do not immediately and accurately reflect newly published information. The above manifestations violate the three assumptions of the efficient market theory, so the conclusion is that the efficiency of the Vietnamese stock market is very low.
Third, investment budget for securities transaction supervision is not at the right level.
Limited funding for securities transaction monitoring activities on the Vietnam Stock Exchange is an important reason leading to the limitations of strengthening transaction monitoring. To strengthen securities transaction monitoring, a large amount of initial investment and annual expenditure on facilities, including offices, equipment, software, databases, consulting services and human resources are needed.
Currently, securities business and service organizations and investors on the Vietnam Stock Exchange do not have to pay transaction supervision fees. Supervision costs at the State Securities Commission level are paid by the state budget and are mainly spent on human resources according to the salary coefficient of state employees, with the number at the beginning of 2009 being 19 people (3 leaders, 16 specialists) [1]. In Japan, in 2008, the total number of employees working for SESC - the Japanese securities market supervision agency - was 640, of which 358 people worked at the head office and the rest worked at branches and affiliated offices [57]. In Korea, FSS (Financial Supervisory Services) operates with funding from two sources: the state and contributions, SFC (Securities and Future Commission) operates entirely with state funding [80].
The cost of supervision at the Stock Exchange depends on the organizational model of the Stock Exchange. When the Ho Chi Minh City Stock Exchange was still a securities trading center, a public service unit, the cost still came from both the state budget and revenue from transaction fees and membership fees of securities companies, but it had the same nature as the state budget. When the Ho Chi Minh City Stock Exchange operated as a one-member state-owned limited liability company, the cost came from revenue from transaction fees and membership fees of securities companies. However, the revenue from the fees was not spent adequately on supervision activities, resulting in transaction supervision not developing and not being highly effective. Experience of the stock exchanges
Developments show that to strengthen the supervision of securities transactions, the expenditure must be very large. At the Australian Stock Exchange, every year, business organizations, securities services and investors must pay supervision fees, equivalent to 1.5 million USD [63].
*
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In Chapter 2, the current status of securities transaction supervision on the Vietnam Stock Exchange
has been studied, taking Ho Chi Minh City Stock Exchange as an example.
After clarifying the context of securities trading supervision on the Vietnam Stock Exchange, the effectiveness of the Vietnam Stock Exchange has been tested. The test results show that the Vietnam Stock Exchange in general, and the Ho Chi Minh City Stock Exchange in particular, do not achieve weak efficiency, the market is exploited by manipulation and insider trading, with different levels of exploitation in the research periods and other violations of the law related to securities trading.
In addition, the current situation of securities transaction supervision on the Vietnam Stock Exchange, at both levels of the State Securities Commission and self-governing organizations, has been analyzed with many different contents. Through the analysis, we can see a panoramic picture of securities transaction supervision on the Vietnam Stock Exchange, in which, the supervisory entities have only been able to supervise violations of compliance with legal regulations on transaction procedures and disclosure of related information, but have not been able to supervise insider trading and market manipulation.
Based on the analysis, the results achieved, limitations and causes of the limitations have been evaluated and summarized. This is the basis for proposing solutions to strengthen the supervision of securities transactions on the Vietnam Stock Exchange in Chapter 3.
CHAPTER 3
SOLUTIONS TO STRENGTHEN SUPERVISION OF SECURITIES TRADING ON VIETNAM'S STOCK MARKET
3.1. ORIENTATION FOR DEVELOPMENT OF VIETNAM'S STOCK MARKET
The general goal of developing the Vietnamese stock market is to be synchronous, stable, and gradually turn the stock market into an important component of the financial market, contributing effectively to mobilizing capital for investment, development, and economic reform, ensuring publicity, transparency, maintaining order, safety, and efficiency, strengthening market management and supervision, protecting the rights and legitimate interests of investors, gradually improving competitiveness, and proactively integrating into the international financial market [14].
3.1.1. Orientation to 2010
a) Develop scale, improve quality and diversify products to meet market demand
- Expand the scale and diversify the types of bonds, methods of issuing government bonds, local government bonds, and corporate bonds in the capital market; develop corporate convertible bonds and project bonds to invest in key national infrastructure projects;
- Promote the equitization program of state-owned enterprises, corporations, economic groups and state-owned commercial banks, linking equitization with listing on the stock market; expand the issuance of new shares to mobilize capital on the market. For equitized enterprises that meet the conditions, they must be listed; at the same time, review and implement the sale of the State's capital in the