The Law on Securities defines the scope and application of regulations governing the issuance, trading, investment, and provision of securities services in Vietnam. It applies to Vietnam’s securities industry, to both domestic and foreign entities, including public companies, securities firms, and investors operating in the Vietnamese market.
What is Vietnam’s Securities Law?
Vietnam’s Securities Law governs the activities of the securities market in Vietnam, including the issuance, trading, and provision of securities-related services. It aims to regulate and develop a fair, efficient, and transparent securities market, protect investors, and promote sustainable economic growth.
The law covers various aspects of the securities market, such as the establishment and operation of securities companies, fund management companies, and securities investment funds. It also sets the framework for the issuance and public offering of securities, listing on stock exchanges, and disclosure of information by public companies.
The most recent version, amended in 2019 and effective from January 1, 2021, includes stricter regulations on corporate governance, increased transparency requirements, and enhanced investor protection measures. It introduces new rules on market manipulation, insider trading, and sanctions for violations, aiming to align Vietnam’s securities market with international standards and attract more foreign investment.
Who does Vietnam’s Securities Law apply to?
Vietnam’s Securities Law applies to a broad range of entities and individuals involved in the securities market. Specifically, it covers:
Public Companies: Companies that have conducted a public offering of shares or have shares listed on the stock exchange.
Securities Issuers: Organisations and companies that issue securities, including shares, bonds, and fund certificates, to raise capital from the public.
Securities Companies: Firms that provide securities-related services such as brokerage, trading, underwriting, and investment advisory.
Fund Management Companies: Entities that manage investment funds and securities portfolios on behalf of investors.
Securities Investment Funds: Collective investment schemes that pool resources from investors to invest in a diversified portfolio of securities.
Stock Exchanges and Securities Trading Centers: Institutions where securities are listed and traded, such as the Ho Chi Minh City Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX).
Investors: Both domestic and foreign individuals and institutions that buy, sell, or hold securities in the Vietnamese market.
Market Intermediaries: Organisations that provide services related to securities custody, clearing, settlement, and transfer.
The law sets out rules and obligations for these entities, including requirements for registration, licensing, disclosure, and compliance to ensure market integrity and protect investor interests.
Key provisions in the Law on Securities
Rights and Obligations of Issuers (Article 13)
Issuers of securities are required to disclose complete, accurate, and timely information about their business operations, financial status, and other material facts that could affect investment decisions. This article outlines the requirements for prospectus disclosure and the responsibilities of issuers during public offerings.
Conditions for Public Offerings (Article 15)
Companies conducting public offerings must meet specific conditions, including a minimum level of charter capital, profitability requirements, and an approved plan for the issuance and use of capital. This article ensures that only qualified entities are permitted to raise capital from the public.
Foreign Ownership Limits (Article 43)
Foreign ownership in public companies is restricted, generally capped at 49%, unless otherwise stipulated by specific laws or international agreements. This provision regulates the extent to which foreign investors can participate in Vietnam’s securities market.
Licensing of Securities Companies (Article 75)
Securities companies providing services such as brokerage, underwriting, and investment advice must obtain a licence from the State Securities Commission (SSC). This article sets out the conditions for licensing, including capital requirements, personnel qualifications, and business scope.
Market Conduct and Prohibited Practices (Article 12)
This article prohibits acts such as insider trading, market manipulation, and the dissemination of false information. It aims to protect investors and maintain market integrity by outlining penalties for violations and unethical practices in the securities market.
Information Disclosure Obligations (Article 16)
Public companies, securities firms, and fund management companies are required to disclose periodic and extraordinary information to ensure transparency. This includes financial reports, changes in ownership, and significant corporate events that could impact share prices or investor decisions.
Investor Protection and Dispute Resolution (Article 95)
The law provides mechanisms for investor protection, including regulations on the handling of disputes between investors and securities service providers. It also outlines the procedures for filing complaints and seeking resolution through the SSC and relevant judicial bodies.
Box 1: Tracking the performance of Vietnam’s stock exchanges
The Vietnam stock market index most commonly used is the VN-Index. This is made up of a basket of stocks listed on the Ho Chi Minh City Stock Exchange–or HoSE for short–and is published and analysed in most major news publications in Vietnam daily.
That said, there are several other indexes, both domestic and foreign, that track different aspects of Vietnam’s key stock exchanges. These include the VN-Index, the VN30, the HNX, the HNX30, the MSCI Vietnam Small Cap Index, MSCI Vietnam Index (USD), FTSE Vietnam All-Share Index, and the FTSE Vietnam Index among several others.
How is the Law on Securities enforced?
The Law on Securities in Vietnam is enforced through a combination of regulatory oversight, monitoring, and penalties administered by the State Securities Commission (SSC), the Ministry of Finance, and other relevant authorities. The enforcement mechanisms ensure compliance with legal requirements and maintain the integrity of the securities market.
Regulatory Oversight by the SSC
The State Securities Commission (SSC) is the primary regulatory body responsible for enforcing the Law on Securities. It oversees all activities related to securities issuance, trading, and services. The SSC grants licences to securities firms, monitors compliance with reporting and disclosure requirements, and conducts inspections and audits of market participants.
Monitoring and Compliance
The SSC and the Vietnam Stock Exchange (HOSE and HNX) actively monitor market activities to detect irregularities such as insider trading, market manipulation, and non-compliance with disclosure obligations. Surveillance systems are used to track trading patterns and report suspicious activities, which may trigger further investigation.
Inspections and Audits
Regular and ad-hoc inspections and audits are conducted on securities companies, fund management firms, and public companies to ensure compliance with the law. These inspections check for adherence to capital adequacy, financial reporting, corporate governance, and operational standards.
Penalties and Sanctions
Violations of the Law on Securities can result in a range of penalties, including fines, suspension or revocation of licences, and restrictions on trading activities. In cases of severe violations, such as fraud or insider trading, criminal prosecution may be pursued under the Penal Code.
Dispute Resolution and Investor Protection
The SSC provides mechanisms for handling disputes between investors and securities service providers. Investors can file complaints with the SSC, which will investigate and, if necessary, take corrective measures. This helps protect investor interests and maintain market confidence.
Coordination with Other Authorities
The SSC collaborates with the Ministry of Finance, the State Bank of Vietnam, and law enforcement agencies to enforce the Law on Securities. This coordination ensures comprehensive regulatory coverage and addresses complex cases involving multiple jurisdictions or financial crimes.
These enforcement mechanisms collectively ensure that the Law on Securities is applied effectively, promoting a transparent, fair, and stable securities market in Vietnam.
Box 2: Opening a securities trading account in Vietnam
Through a trading account in Vietnam, investors can monitor stock prices, execute trades, and manage their portfolios. The account can be linked to a bank account for depositing or withdrawing funds. Some trading accounts offer additional features like access to research reports, margin trading (borrowing to buy more shares), and other investment products like ETFs and mutual funds.
To invest in Vietnam stock markets, however, non-Vietnamese will need to complete a number of additional steps over and above what a local will need to do. This is not necessarily a complicated process but it can be tedious…
What’s next?
The Law on Securities in Vietnam regulates the issuance, trading, and provision of securities services to ensure a transparent and stable market. It sets rules for public companies, securities firms, and investors, including requirements for disclosure, licensing, and foreign ownership limits. The law is enforced by the State Securities Commission (SSC), which monitors compliance and penalises violations to protect investors and maintain market integrity.
This law, however, is subject to change in the near future as Vietnam moves to have its stock market upgraded from a frontier to an emerging market. With this in mind, to keep track of changes to the Law on Securities, foreign firms looking to trade in Vietnam, should make sure to subscribe to the-shiv.