D ecree 75/CP established the ssc in 1996,553 but the Com m ission íormally cam e into existence on April 1, 1997.554 D ecree 75/CP was rather simply designed, with only 6 articles, which lay down the whole legal structure as well as t h e í u n c t i o n s , r ig h ts a n d d ut i es o í ' t h e s s c .
The s s c is a governmental agency whose functions include organizing and adm inistering securities and securities markets. 55 The s s c has ỉegal personality.
Its operating expenses are funded by the State budget. Its íunctions include organizing and m anaging securities and securities markets.
In contrast to the u s securities laws stating that the SEC is an independent agency, not part o f the president's cabinet and speciíying the number of com inissioners and their terms,556 D ecree 75/CP, while expressly saying that the
553 On N o v e m b e r 28, 1996, the Vi e t na me s e Gover nment signed D e c re e 75-CP to establish the State Securi ti es C o mmi s s io n .
554 S e e State Securities Co mmi ss i o n , "Noi clung b a i g ia n g kh oa d a o ta o ve C h u n g kh oan va Thi Iru o n ạ c h iin ẹ k h o a n " [T h e C o ỉite n ls o f L e c tu re s D e lìv e rc c ì cit Cỉ T rain in g S e ssio n OYÌ S ecu ritie s a n d S e c u r itie s M a rk e ts] conducted ỈVom J11 ly 27 to Augus t 15, 1998 (This training course was held by the Ch i n e se Hong Konsỉ, ỉiistitute and the State Securities Co mm i s si o n ) , 196.
555 See D e c r e e 7 5 /C P, Art. 1.
556 See S e c u r ìtie s E x ch a n q e A c t o f 1934 s 4, 15 u s c 78d.
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s s c belongs to the governm ent, does not speciíy a íìxed num ber o f s s c m e m b e r s n o r does it h a v e any article p ro v id in g the m e m b e rs ' term s o f Service. It m erely says that the s s c consists o f a president, vice presidents and other com m issioners being deputy ministers o f different ministries such as the Ministry o f Finance, Ministry o f .ĩustice, Ministry o f Planning and Investm ent and the State B an k o f Vietnam. The president and vice presidents are appointed and dismissed by the Prim e Minister. O ther commissioners are reco m m en ded by the relevant m inistries and the State Bank o f Vietnam, also to be decided by the Prime M inister.557
A notable point h ere is that all the commissioners o f the s s c are working on a part-tim e basis since at the same time they hold other positions in the said ministries. Regulating securities markets is complicated and burdensom e work.
W ith such a dual-function, it is hard for them to accom plish their tasks adequately. In the u s , the commissioners o f the SEC, u n d er the law, cannot hold another position in any other office. Pursuant lo the E xch onge Act:
‘ No com m issioner shall engage in any other business, vocation, or em ploym ent than thoi o f serving as com m ỉssioner, nor shall any com m issioner participate, directly or indirectly, in any sto ck-m a rket operations or transactions o f a character subịecí to regulation bv the C om m ission p ursu a n t to this title ' ’ * 358
This provision vvas clearly designed to ensure that the com m issioners devote their vvhole timc and expertise to their job.
b. The s s c Powers
Article 2, D ecree 75/CP contains 12 sub-articles spelling out the powers and duties o f the s s c . SiLich povvcrs and duties can be classiĩied into Ivvo groups:
rule-m aking and administtrative povvers.
S e e D e c r e e 7 5 / C P, A r t . I . a n d 3.
ri>s S e e S ơ c i i r i t ì e s E x c l ì í i ì i i ỉ e A l c l o f 1 9 3 4 s 4 ( a ) . I 5 usc 7 8 d ( 2 0 0 2 ) .
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b. 1. R id e-m a kin g pow ers
Rule-m aking powers can be found in Sub-articles 1 and 7 o f Article 2, u n d er which the ssc is in charge of:
Draýting legal rules on securities a n d securities m arkets to subm it to the com petent authority f o r consideration and approval; organizing and guiding the im plem entation o f such approved legal documents.
Issuing rules concerning listing, issuing announcem enís and other inform ation about securities transactions, purchase and sale; cooperating with the M inistry o f Finance in establishing fe e s a n d costs concerning the issuance and tradinẹ o f securities.
To date the ssc has shovved its effort in the rule-m aking area by issuing v olum inous documents vvithin its povvers, under the form o f decisions and circulars. These rules range from those governing securities trading cenlers and securities íirms to others regulating public issuance and securilies transactions on secondary markcts. A number o f such rules have been revised, even several times.
b.2. A dm inistrative Po\vers
Administrative povvers allow the ssc to act as a public regulatory agency over securities markets. The ssc is responsible for granting securities business liccnses, suspending and revoking such licenses where necessary, and granting sccurities issuing licenses to those who desire to eo public for 1'und raising. Such povvers are laid dovvn in Sub-article 3, vvhich reads:
Granting, suspending cincỉ revoking securities business licenses with respcct to securities firm s, securities advising companies, securities investm ent fu n d s, fu n d m anagem ent com panies a n d other organizatìons that are eligible to issue securities on the securities market.
b.2.1. Secu rities Business Licensing
The S S C s povver to coníer a business license on those who seek to carry out securities business seems unnecessary and goes aeainst the ữeedom ol doing
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business entrenched in the 1992 C onstitution,559 ư su ally , in other countries, those w ho seek to do securities business merely file registration docum ents with the relevant governm ent authority.
In Japan, a switch betw een registering and licensing systems has been made several times. After the Second World War, Japan adopted a registration system for securities com panies.560 The 1965 A m endm ent o f the Securities a n d E xchange Law replaced that system wilh a licensing One.561 A t that time, the M inistry o f Finance was in charge o f granting business licenses for securities com panies.562 By this licensing system, the lawmakers hoped that u nqualiíìed broker-dealers w ould be excluded and the Finance Ministry would be more powerful in adm inistering securities firms.563
The revision o f the Japan Securities an d E xchange L ow in 1998, however, wcnt back to a simple procedure o f registration applied to those w ho desire to do securities b u s in e s s .564 U nder the recent revision o f the Law (in 2001), this registering system has rem ained intact.565 Corporations that desire to engage in securities business have to fíle with the Prime M inister an application containing speciĩied statem ents for registration. Such an application m u st be accom panied by certain docum ents as provided for by the lavv.566 W here the application does not fall into the specitìed items that can be deem ed as “ Rẹịection o f Registration” ,567 the Prim e M inister m akes the securities company register available for public inspection.M)S
A sim ilar simple procedure to that o f Japan can be seen in the us, where
Lhose vvho are seeking to acl as a broker or dealer are m erely required to file vvith
5y Ar l i cl e 57 o f the C o n stitu tio n vests the IVeedom o f d o i n g b us i ne s s in V i e t n a m e se citizens.
561 S e e Loui s L o s s c t a ỉ ( eds ) , a b o v e n. 2 61 , 90.
561 Ibid, 91; s e e a l s o Japan Securi ti e s Research Institute, a b o v e n. 3 9 8 , 18.
56: S e e Loui s L o s s e í a l ( eds) , abo v e n. 2 6 1 , 9 1 . 563 Ibid.
5í)J S e e S e c u r iỉie s a n d E x ch a n g e L a w o f 1948 ( 1 9 9 8 Japan), Art. 28 . Thi s article reads: ‘Wo p e r s o n o th e r th an a jo i n t s to c k co m p cm y r e g is te r e d w ith th e P r ỉm e M in is íe r s h a ll e n g a g e in the
s e c u r itie s b u siìie ss. ”
S e e S e c u r iíie s a n d E x c h a n q e L a w o f 1 9 4 8 (2001 Japan), Art. 28. The n e w Article 28, alĩhough it k e e p s the registering s ys t e m intact, is slightly altered in that it is no ionger conĩ i ned those w h o s e e k to do securities b us i ne s s vvithin j oi n stock c o m p a n i e s . This Article reads: “No person sh oỉì en ẹage in securities busỉness excepí for a Corporation that has registration
th e re fo re m acỉc b y th e P rim e M in iste r. "
Ibid, Art. 28- 2.
56‘ Ibidl Art. 2 8 - 4 5M ỉbid., Alt. 28-3.
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the SEC an application for registration.569 This should be taken into account while revising the secũrities regulation o f Vietnam.
b.2.2. P ublic O ffering L icensing
The V ietnam s s c even has a discretionary pow er in granting securities issuing licenses under D ecree 48/1998. D epending on w hich kind o f securities wi 11 be issued, the issuer has to file different documentation vvith the s s c . Article 9, D ecree 48/1998 gives two separate lists o f documents to be included in the application for the issuance o f shares and bonds.570 Within 45 days from the date o f receipt o f the application, the s s c must grant or refuse to grant the issuing ỉicense to the applicant. W hen reíusing to grant the license, the s s c has to issue a letter o f explanation to the applicant.571
Clìina used to adopt Ỉ1 similar approach to that o f Vietnam before the passage o f the Securities L aw o f the People 's Republic o f China. By such an approach, there were requirements o f issuing approval procedures and qualifications imposed on those who sought to make a public oíTering o f either stocks or bonds. The future issuers had to go through certain speciĩied processes such as lìlin g application documents, being examined by the State authority, and obtaining an approval from such an authority. These provisions were said to reílect one o f the “ aspects o f exccssive government control” under the Interim R egulations in China.572
The nevv Securities Law o f the People 's Republic o f China, passecl in D ecem ber 1998, however, has in part eliminated the above-m entioned diffìculties. Novvadays, those who seek to initiate public issuance o f shares are no longer required to obtain the approval o f the market watchđoơ. Rather they are
re q u ire d lo have t h e ir application v e r iíìe d b y the State authority o v e r s e e in g the securities market. The current regulation reads:
569 S e e S e c u r ilie s E x ch a n g e A c t o f 1 9 3 4 s 1 5 (b), 15 u s c s 7 8o (2002). Section 15(b) ( 1 ) reads:
"A b r o k e r ơ r cìea ìer m a y b e r e g is te r e d b y / i l i n g xvith the C om n iissitìii an a p p lic a lio n f o r re g istrcitio n in su ch fo rm a n d c o n ta in in g su ch in fo rm a tio n a n d d o c u n m U s c o n c e rn in g su ch b r o k e r o r c /ea ler a n d a n y p e r s o n s a s s o c ia te d w ith su ch b ro k e r o r d e a le r a s the C o m m issio n , b y ritle, m a y p r e s c r ib e CIS n e c e s s a r y o r a p p r o p r ia te in the p u b ìic in te re st o r f o r the p r o te c tio n o f in v e s lo r s * * • ”
570 T l i c s e l i s t s vvere m entioned in Section I, Sub-section 1, C h a p t e r II oi tliis p a p e r . S e e D e c r e e 4 8 /1 9 9 8 , Al t. I 1.
572 S e e Jay Zhe Zhang, abo ve n. 25 7 , 625.
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P ublic offers o f shares shall, in com pliance with the conditions p ro v id e d fo r in the C om pany Law, be reported to the securities regulatory authority under the Sta te Council f o r verification. The issuer sh a lỉ su b m it to the s a id authority
the application docum ents p re sc rib e d in the C om pany Law an d the reỉevant docum ents sp ecified by the autlĩority.573 It is interesting that the public issuance o f bonds still seems to overcome strict control o f the government. The Law íurther says:
The issuing o f corporate bonds shall, in com plỉance with the conditions p ro vid e d fo r in the C om pany Law, be reported to the departm ent a u th o riied by the State C ounciỉ fo r exam ination a n d approval. The issuer sh a ll su b m ỉt to the departm ent authorized by the State C ouncil the application docum ents p rescrib ed in the C om pany L aw a n d the relevant docum ent specified by the sa id departm ent.574
The nevv Securities Law o f the People 's R epublic o f C hina m ore or less shows an improvement, while Vietnam seems to have stepped in the same direction China did in the past. The statutory discretionary p o w er o f the V ietnam ese ssc might cause some fears to the public as lo w hether the ssc
decision w ould be very likely to have been affected by its ovvn interests. This can be contrasted with the simple procedure o f iìling a registration statem ent to the governm ent authority adopted in many countries around the world, including the
us and Japan. The u s is an example where the issuers do not have to get an issuing license from the SEC. They merely fĩle a registration statem ent with the SEC 575 and disclose specifíed iníbrmation 576 to the public in a detailed p ro sp ec tu s.577 The registration statement will automatically b ecom e effective vvithin 20 days after the filing date.578
57’ See S e c u r iíie s L a w o f th e P e o p le 's R e p u b ỉic o f C h in a 1 998, Art. ] 1, first paragrapli.
S7i Ibid, se c o n d paragrapli.
S e e S e c u r itie s A c t o f 1933 s 6, 15 u s c s 7 7 f (2 0 0 2 ).
576 I b i d , s 7 , 15 u s c s 7 7 g .
” 7 Ibid, s 10, 15 u s c s 7 7 ị.
S7X lbid, s 8 (a). 15 u s c s 77h.
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b.2.3. P ow ers over Securities Trading C enters/Stock Exchanges
Administrative powers also put the ssc in charge o f establishing and dissolving stock exchanges; and inspecting and supervising the operation o f stock exch an g es and other entities issuing securities or having engaged in securities business. Article 2 Sub-articles 5 and 6, D ecree 75/CP gives legal bases for such authority. It reads:
R eporting to the go vernm ent fo r decisio n-m aking concerning the establishment, suspension or dissolulion o f stock exchanges.
Inspecting and overseeing the activities o f sto ck exchanges an d other relevant organizations w hich engage ỉn securities issuance a n d trading an d other securities services.
W hile expressly saying that the ssc can inspect activities engaged in by stock exchanges and other organizations, Article 2 keeps silent on the S S C ’s ability to impose administrative disciplinary sanctions on those who are subject to the licensing authority. It does not say vvhether or not the ssc has subpoena and enforcem ent povver either, or whether or not it can directly períbrm prosecutorial functions. Article 2.10 merely says that the Commission can:
A ct on its own initiotive and cooperate with relevant governm enlcil branches in applying necessary m easures to ensure thai the operalion o f securities m arkets is effective and in accordance w ith the laws.
Clearly, this provision does not tell which activities the s s c can do on its ovvn initiative and which should be done in coordination with other governmental agencies. The term “necessary measures” should be explicitly explained here.
b.2.4. Sa n ctio n in g Powers
The s s c povvers in imposing administrative sanctions, however, are provided for in Article 15, D ecree 22/2000. According to this article, there are tvvo governm ental agencies in charge o f imposing administrative sanctions: the Inspection D epartm ent o f the ssc and the Provincial People's Committees. The chieí' inspector and other inspectors o f t h e said Department can act on behalf of the s s c . Administrative sanctions include vvarning sanctions; ỉlnes; and
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revocation o f licenses (including issuing licenses held by issuers, securities business liccnses helcl by securities firms, and practicing licenses held by securilies trading s ta ff w o rk in g in securities firms). A dm inistrative sanctions also extend to som e other m easures such as coníĩscating all am ounts earned by the violators; and m aking the violators restore the saíety ratio (to meet the initial stage or the statutory requirem ent), revoking 01' correcting m isiníbrm ation, and com pensaíing damages.
A rticle 18, D ecree 22/2000 íurther says that the violators m ust implement such sanctions im posed by the persons in charge. Should the sanctions not be im plem ented, enforcem ent will be carried out in conformity with Article 55, O rdinance on A d m in istra tive Violations Seítỉem ent. Sub-article 2 o f this Article say that persons w ho have p o w e r to impose administrative sanctions also have povver to enforce the im plem entation o f such sanctions. This m eans that the ssc
cỉoes have en íbrcem en t povvers. Although the ssc povvers are not as broad as those o f the u s SEC, they are broader than those o f the Japan SESC, since it can impose adm inistrative sanctions and it has eníorcem ent capabiỉity where violations are detected and sanctions are deĩined.
b.2.5. M ed ia tin g P ow ers
An inleresting provision, that cannot be íbund in either the u s or Japan securities laws, concerns the dispute reconciliation powers o f the ssc. D ecree 75/CP does not s a y t h a t the s s c has s u c h powers but, they are p ro v id e d for in Article 79, D ecree 48/1998. This article allovvs the s s c to act as a mediator to settle disputes concern in g the issuance and trade o f securities and other securities transactions. T h is article reads:
D isp u tes a rising in securities issuance a nd trading and secu rỉties transactions m ust fìr s t be h a n d led by negotiation a n d reconcỉliation. Securitìes Trading Centers, Stock Exchanges, or the State Securities C om m ission can act as a m edia to r in such disputes.
Hovvever, in solving disputes, the ssc povvers are merely conĩined to reconcìline,. T h e ssc cannot hold an administrative hearing to determine the
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violation o f the securities reg ulatio n s.579 Such a procedure can only be done at a c o u rt o f law. Article 79 says:
Ị f the recon ciliation is not successỷuỉ, p a rtie s to the dispute can brin g the dispute to an econom ic arbitration or to a court to be settled in accordance with the ỈŨM>S.
b.2.6. O ther A d m inistrative P o w ers
The ssc adm inistrative pow ers also allow the ssc to develop and promote securities markets as well as to ensure that the markets operate effectively and lavvíully. To achieve suclì goals. the ssc is empowered to ací as follows:
A ctin g on its own ỉnitiative a n d cooperating with other relevant m inistries and go vernm ental branches in esta b lish in g and developing securities m arkets in Vỉetnam 580 Estciblishing a nd adm inistering organizations w hich provide services a n d assistance in securities m arkets.581
Training m arket managers, securities decilers and stren g th en in g their special expertise 582
C oop era ting with iníernational organizations and countries in d evelo p in g securities m a r k e ts ĩ8i
ỈV> In the us, the SEC has an e nt i t l ement to bring an action in a court o f l aw to enjoin violation oi' securities laws. The Securities Exchunge A ct o f 1934 says: “ * • • it may in its discretion b r in g an a c tio n in ihe p r o p e r d is tr ic t c o u r l o f the U n ite d S ta tes, th e U n ite d S ta te s D is tr ic t C ou rt Ị o r the D is tr ic t o f C o lu m b ìa , o r th e U n ite d S ta te s c o u rls o f a n y te r r ìlo r y o r o th e r p ìa c e su b je c t to the juriscỉiction o f ihe U nited States, to erỳoin such acts or practìces, and upon a proper show ìng a permcinent or lem porary injimction or restraining orcler shall be grcmted without boncl • • • [See Securilies E xchange Act a f 1934 s 21 ( d ) ( l ) , 15 u s c s 7 8 II (2002)].
Th e SEC ca n also order an administr ative hearing against persons and firms registered vvith it, to def i ne liabilities o f the violat or and to impose sanctions [see S e c u ritie s E x ch a n g e A ct o f 1 9 3 4 ss 2 1 B & 2 1 c, 15 u s c ss 7 8 u - 2, 78u-3 (2002) ] .
^so S e e D e c r e e 7 5 -C P , Art. 2: Sub-Art. 2.
^Sl Ibid, Sub-Arl. 4.
582 Ibid, Sub-Arl. 8.
58‘' Ibicỉ, Sub-Art: 9.
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In addition, the ssc is responsible for m anaging its premises and personnel in coriformity vvith the government's provisions. It also carries out other tasks as assĨ2,ned by the go v ern m en t.584
So me Remnrks
By adopting these provisions, it is very likcly that Vietnam vvill undergo the sam e experience as Japan did before reforming its Ministry o f Finance in response to the scandals. That is, having a governmental agency with a dual role:
acting as a promoter and regulator o f the securities industry at the same tim e.585 This situation in Japan has been criticized since it gives rise to potential conílict o f interest vvhere an agency acts as both protector and overseer o f securities regulation.586
A n other similarity betvveen the Vietnam ssc and the Japan SESC is that both lack authority to prosecute criminal offenses. All these shortcomings might result in some constraints to the effectiveness o f the ssc worlc.
As eaiiier discussed, the effectiveness o f the operation o f a public regulator depends greatly on the extent to which the regulator can act independently. This has been proven by vvhat happened in the us and Japan. Experience undergone hy these tvvo countries seems 10 support the need lor an independent public regulator. Although .lapan has not yet had a formal independent agency as the us
does, the need for an independent SESC has been discussed for y e a r s .587 Hovvever, the situation has not been improved much, since the Ministry o f Finance does not support the Japanese-style SEC proposal.588 The Ministry does not w ant to narrovv dow n its exclusive controi over securities industry.589 It desires to retain its authority over the SESC and argues that an independent agency is not necessary since the securities companies can be better monitored by a licensina system and an independent agency would be too isolated from the iníbrmation to \vork properly;590 that an independent agency modeled afler the us
5S“' Ibid, Sub-Arts: 1 1 - 12.
585 See Curtis J. Milhaupl, a b o ve 11. 31 I, 4 4 4 .
586 n • ,
Ibid.
*87 Ibid, 4 7 4 - 475; see also N i c o l e J. Ramsay, above 11. 504, 2 5 6 , 2 68 , 280.
588 Ibid, ( N i c o l e J. Ramsay), 2 80 .
589 T I - 4
Ibid.
5)0 S e e Grcsiory D. Ruback, a b o v e II. 5 05 , 21 I - 2 1 2 .
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