The second biasest problem with the current intbrmation disciosure regime is, perhaps, the absence o f inlonnation disclosure requirements applying to companies vvhosc securitics issuancc does not constitute a “ public offering’ vvithin
T o v v a r d s a W e j j F u n c t ioni mằ S e c u r i t i e s M a r k e Ị in V i e t n a m : C h a p t e r 11
the purview o f Articles 2.2, 6.5 and 8.2, D e c r e e 4 8 /1 9 9 8, and on non-listed com panies.
In practice, the num ber o f companies that meet listing standards is limited, and even amongst companies that already meet listing requirem ents, not all are w illing to list. This leads to a pragmatic problem since non-listed companies seeking pccuniary recourse from the public are numerous, but not subject to either offering disclosure or continuous disclosure requirements prescribed in the current securities regulations.
Obviously, in such a circumstance, a legal framework for the operation o f an O T C m arket with a comprehensive iníbrmation disclosure regulation is urgently required. Such a regulation should embrace both offering disclosure and continuous disclosure requirements, to ensure that public investors are well informed. It is important that relevant shortcomings o f the current disclosure regim e applying to listed companies should be examined so as to maximally avoid sim ilar statutory deficiencies in its future counterpart regime applying to non-listed com panies. In such a regime, possibly all types o f disclosure requirem ent should also be laid dovvn as binding on non-listed companies.
In Japan, a company, whether listed or not, having more than 500 million Yen oi' le^al Capital, and having 500 shareholders or more, is required to report to the Prime Minisler.2|) Similar provisions have also been adopted in the u s . 250
3. T h e Need to Adopt Comparabỉe A cco u n tin g Rules and Independent A u đ itin g
a. A ccounting rules
As íor íìnancial statements, types o f inlbrmation included in the statement should be simpliíìed to enable companies cope vvell vvith reporting work, especially vvhen human resources in accounting and auditing in Vietnam remain constrained. The íuture contents o f the tìnancial statement should be redetìned to make it useíul not only for taxation purposes but also for investment purposes.
A ttention should also be paid to the components o f the íìnancial statement.
JW S e e S ơ c u rilie s cmcl Excỉiaii^e L aw t ì f 1 9 4 8 ( 2 0 0 1 J a p a n ) , A r t . 2 4 . 1 . 4 ; see a l s o E n /o rcem en l R ơ ^ i t l a l i o n o f ' C a b i i i e l . A r t . 3 - 6 . 2 .
S c e tho S ecu riliơ x lixchaiHỉL’ A c l ọ f 1 9 3 4 s I2(a) & (ti). 15 usc s 78/.
75
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Possibly, the statement should reílect the changes in reserved proíĩt so that it vvould becom e more informative and useful for investors.
These improvements are o f importance in bringing V ietnam accounting rules closer to those adopted elsewhere. I f internationally com parable accounting standards can be achieved in Vietnam, the country’s securities market might beco m e more attractive to íbreign investors. Poreign investors vvili reírain from investing in the securities market o f a country if they cannot compare the íìnancial conditions o f that country’s com panies with those in other countries because each country adopts a different accounting system. N o country should ignore the fact that an internationally comparable accounting law plays a significant role in m ak in g up the attractiveness o f a securities market.
b. Independent A u d itìn g fo r AU Shareholding Companìes.
U nder the Enterprise Act, independent auditing only applies to a number o f shareholding companies, as earlier m e n tio n e d .251 To single out a num ber o f com panies vvhose íìnancial statements need not be audited might give the opportunity for com pany’s officers to com m it fraud. A requirement that an independent auditor inspect a co m p any ’s lìnancial statements is thus a signiĩicant protective m easure against íraud by the company's offìcers. 252 In future, discrepancies between different auditing requirements adopted by the Enterprise Act, the securities regulations, and the accounting regulation should be eliminated.
It may be a good idca if auditing requirements apply to all shareholding com panies. For big companies, an audit might be required on a short-term basis vvhile lor small companies an audit might be required on a longer-term basis.
c. The N e e d fo r a Supervisory ỉỉtìriy Overseeing Auditìng Practices
Possibly, in order to ensure that the public good in independent auditing receivc appropriate consideration at all times, there is a need for a supervisory body overseeing audit practices. That body should be charged with the responsibility o f reviewins, and evaluating how independent audits o f the financial statem ents o f public companies are períbrm ed and to consider whether the recent trends in audit practices serve the public good. This body should report to the ssc
251 S e e Se c t i on 11, Sub-scction 2 0rlliis Cliapter.
S e e “ General Principles o f Co m p a n y Law lor Transition E c o n o m i e s ” , ( 1 9 9 9 ) 24 Io w a J o u rn a ỉ
<>/ C'or/u>ralion L a u ’ 190, 287.
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w here it íìnds vveaknesses in and íầilures o f the audit process so that the ssc can act in response to such problems in a timely manner to avoid serious consequences that might occur.