In Section I o f this chapter, two main practical problem s were mentioned, namely: non-compliance \vith the current information disclosure regime; and the hesitance o f trading-floor-ready com panies to become listed companies.
N on-com pliance. On the vvhole, non-compliance w ith the law often derives from tw o facts: a general lack o f adequate statutory provisions to enforce the law, and the weakness o f enforcement mechanisms. It can be said that both facts have been applicable in the context o f Vietnam.
So far, sanctions for violation o f securities regulation have merely been adopted at the administrative levcl. Although D ecree 48/1998 provides for disciplinary, administrative, criminal, and civil sanctions, to date the government has only issued one single rule governing administrative violations in the field o f securities markets. D ecree 22/2000 253 provides íor rather comprehensive treatment o f administrative violalions oi' the regulation o f public issuance o f securities. Such treatment lalls ỉnto four cateeories: íìnes ranging from 5 million to 50 million Dong (around 300 lo 3000 USD); supplementary sanctions (suspending or w ithdrawing issuing license; coníìscating Ihe entire turnover from services provided by thc violalors); and othcr sanclions.
Despite the existence o f such administrative sanctions, in practice violation o f th e inlbrmation disclosure regime do occur. This suggests that sanctions that are morc severe should not be ignored as a means oi' putting m arket participants under appropriate discipline. Possibly, vvhat public investors need is not many further laws and regulation to protect them, but rather m ore drastic enforcement o f existing lavvs by the ssc.
C o m p a n ies' H esitancies. The problem o f ne°ative attitudes o f bourse-ready com panies tovvards goins, public to raise íunds can be solved in various ways.
25-1 Tliis D e c r e e, dated July 10, 2 000, promul gates the " Re gul at i on o f the Treatment o f Administrative Vi ol ati ons in the Fielct o f Securi t i es and Securities Markets".
:m Scc Alt. 4.
77
T o vva r ds a W e l l P u n c t i o n i ỉ m S e c u r i t i e s M a r k e t in V i e t n a m : C h a p t e r II
The main reason Ihat triggers com panies’ hesitancy lo become listed is the fear o f íầcing information disclosure duties aftcr bcing listed. Perhaps a solution for the im m ediate future would be for information disclosure duties to be imposed on very big shareholding companies with a high num ber o f shareholders and high equity C a p ita l, regardless o f whether they are listed or not. This coulđ be done by revising the Enterprise A c t so as to legalize such duties. At present, the Enterprise A c t merely requires all sharcholding com panies to disclose information on an annual basis, as earlier discussed. Such a requirem ent should be broadened by requiring these companies to disclose iníòrm ation on a m ore timely and ữequent basis.
O f course, such a statutory approach m ight have burdensom e implications at g overnm ental authorily level, since it would not be an easy task, in terms o f human resources, to cope with the screening o f information fíled with the authority by sh areholding companies. Nevertheless, this w ould be a good measure to eliminate co m p a n ies’ fear o f íacing information disclosure duties, w hich in turn can be a hurdle on the way to listing on trading fỉoor.
A nother alternative is thai the governm ent could intervene with the status o f the equitized-state-enterprises as a controlline shareholder. This option is feasible s i n c e , in m a n y e q u i t i z e d - s t a t e - e n t e r p r i s e s , t h e State h o l d s a b l o c k o f s h a r es that enables it to keep control o f thc newly íormed shareholding com panies.255
A part IVom lliat, educalional measures should also be employed to help the corporale com m unity to undcrstand the bcneíìts o f becom ing listed companies.
Such b eneíìts are no longer coníìned to listeđ com panies but also extend to public i n v e s t o r s . Thai is b e c a u s e , iìrst Ihey can e n s u r e t h a t the Capital demands o f listed com panies can be met; and secondly, public investors can be maximally protected through transparent disclosures made by those listed companies. To execute such measures, the ssc and the stock trading centers should have websites that can equip the general public vvith knovvledíie o f securities markets in general and o f the bcneílts o f h av ina a transparent iníbrmation disclosure system in particular.
255 D e c r e e -44/1998 r e q u i r e d t h e State to he a c o n t r o l l i n g sliareliolder in a n u m b e r o f shareholding c o i n p a n i e s c o n v e r t c d f r o m St at e e n t e r p r i s e s . R e c e n t l y , D ecree 6 4 /2 0 0 2 , a l t h o u g h it d o e s n o t expl i c i t l v s a y so, Ị x o v i d e s for tour forms o f equitization. In enterprises tliat are equitized under t h e íl rst t l i r e e í o r m s , t h e State still r c m a i n s a s h a r e h o l d e r . e v e n a l a r g e s h a r e h o l d e r , vvith t l i ose transớbrmed inlo sharchold 1111ằ conipanies under the tỡrst and s ec o n d forms. For further in lo rm a tio n , S(JC S e c tio n II, S u b -s c c lio n 2. C h a p tc r 1 o f th is paper.
T o v v a r d s a W e j ] F u n c t i o n i i m S e c u r i t i e s M a r k e t in V i e t n a m : C h a p t e r 111
C H A P T E R III
VVHETHER T H E ANT I-FRA UD R E G U L A T I O N CAN F O S T E R A HEAL THY M A R K E T
Together vvith the information disclosure regime, the anti-fraud regulation plays a signiíìcant role in protecting public investors and in ensuring a healthy market. This chapter will probe in depth the current anti-fraud provisions in order to draw out statutory g a p s that should be íìlled and regulatory weaknesses that should be eliminated so as to achieve better outcom es from the anti-fraud regulation. It argues that ow ing to the sparse language o f the regulation and the absence o f a legal íoundation for investors’ rights o f action, the regulation will fail to prevent manipulative and deceptive practices. ỉt further m aintains that the entire prohibition o f short sale and margin trading vvill deprive the Vietnam ese securities m arket o f strongly supporting instruments.
In explaining the need for anti-ữaud provisions in securities laws, David L.
Ratner maintains:
* ' * since the com plexity o f securitỉes invites unscrupulous p eo p le to ottem pt to cheat or m islead investors an d íraders,
the securities laws conlain provisions p ro h ib itin g a variety o f /rau dulent, manipulcitive or cleceptive practices. These provisions have been opplied to a \vicle range o f activities, including Irading on "inside in/orm cition," m isleading corporate publicity, and im proper dealings by corporate m anagem ent..256
This observation has been proven by securities regulations in countries all over the world, althouẹh the extent to vvhich íraudulent activities are prohibited varies íVom country to country.
In Vietnam, the co re legal rulcs governing securities and securities markets, D ecree 48/1998, includes an entire chapter, Chapter VIII speciíying activities that market participants are either prohibited or reslricted from doing. The prohibited activities include: insider trading, market manipulation, misinformation, short selling, and credit transaetions and lending securities.
:S|’ S e e Davi d L. Ratncr, S e c u ritie s ReiỉiiU ition: M a te ria ls fo r 11 B a sic Cour.se, (3rd ed, 1986), 2.
Hercinafter, David Ratncr ( 3K| ed, 1986).
79
T o v v a r d s a W e j J E y n c t ị o n ị n g S e c u r i t i e s M a r k e t in V i e t n a m : C h a p t e r 111
In contrast to the resulalion o f abusive market practices and anti-fraud provisions in the securities laws o f the u s and o f Japan. C h a p te r VIII, Decree 48/1998 is far simpler. In fact a general lack o f deíìnition c o n cern in g prohibited activities can be seen in it, and it seems that the chapter m erely gives a list o f prohibited activities. It is the purpose o f the following sections. then, to discuss the most serious problems o f the regulation.