SSC may tighten licencing of securities companies

07:37' 11/07/2007 (GMT+7)

VietNamNet Bridge – The State Securities Commission (SSC) has asked for the intervention of the Ministry of Finance in order to restrain the establishment of a massive number of securities companies, but it has received no reply. SSC’s Deputy Chairman Nguyen Doan Hung talked about this. What rights does SSC have in the licencing of securities companies under the current regulations? SSC’s Deputy Chairman Nguyen Doan Hung Some 50 applications for setting up securities companies have been put on the table of state management authorities. If all the 50 investors can prove their capability and get operation licences, the market will have more than 100 securities companies (there are now 56 operational companies). You may know that opinions on the issue vary, and securities companies themselves do not want intervention by administrative order. However, some experts have said that it is necessary to limit the number of securities companies on the market. Similarly, the central bank has the right to tighten and limit the capital flow onto the market. If considering the current laws, you may see that the Law on State Bank stipulates that the central bank can make decisions relating to the existence and operation of banks based on the market situation. However, the Securities Law does not mention the similar right of state management authorities. The law says that investors who can meet all the requirements must be licenced. Investors can initiate legal proceedings against authorities that make decisions contrary to the law. Will management authorities set under-law regulations which relate to the establishment of securities companies? State management authorities can set stricter requirements in order to limit the number of securities companies. However, authorities still must licence companies which can meet all the requirements. In the past, securities companies must have VND43bil to be eligible to provide five types of services. The required capital has been raised to VND300bil, or five times higher than the previous level. However, this seems to be not a barrier for the establishment of more securities companies. A lot of applications have been submitted to SSC and Ministry of Finance. Under the law, the regulation on the required capital cannot be amended. However, state management authorities will consider setting up stricter requirements on technical issues, for example the staffs and qualification of staffs. For example, in order to be able to provide a kind of service, a securities company must have at least three certified staffs specialising in this service. Besides, the requirement on the general director of the companies has also been heightened. I have learnt that in Thailand, state management authorities collect fees for licencing companies. The fee, I guess, may reach VND1bil, which will be collected gradually over five years. In Vietnam, securities companies still get the licences free of charge. You have said that there are different viewpoints about whether to limit the licencing of securities companies. What is the official viewpoint of SSC, then? SSC has made suggestions about this issue. You may see that the existence of too many securities companies has caused an overly high demand for material facilities. The Hanoi Securities Trading Centre, for example, has no more room for transaction representatives from securities companies. The network of trading centres lacks portals for companies to connect to. Some experts said the current number of 200,000 securities investors proved to be too small if compared with the population. If more investors join the market, it would be fine to allow more securities companies to be set up. I have heard some others say that management authorities should let companies be established, the law of competition will decide which company will exist, and which will be dissolved. However, in case we cannot attract more investors, which means only 200 accounts exist, the number of clients for every securities company will be very low. You may know that if companies only serve a limited number of clients, they will not make heavy investment in technologies, which should be seen as a bad thing for the development of the stock market. Has SSC thought of a non-administrative measure, for example, a warning, in order to curb the establishment of more securities companies? Warnings will not help. Every citizen has the right to do business. However, SSC has the right to inspect the material facilities and technologies at securities companies to ensure that the licenced companies operate in good conditions. Will SSC consider revoking licences of companies that cannot meet requirements? SSC has never revoked any licence. In fact, we have released many decisions on punishment over companies that cannot meet requirements or violated the current regulations. The violations were not heavy enough to consider licence revoking. (Source: Viet Nam Net)