Introductory Presentation - Chapter 1- Overview of securities market in Vietnam

Introductory Presentation
Chapter 1- Overview of securities market in Vietnam

Vietnam at a glance
-   Total Area: 331,230.8 km2
-   Population: 92,695,100 (2016 estimate)
-   Density: 280 ppl/km2

Source: General Statistics Office (GSO)

Geography
3/4 territory: low
mountains and hilly regions.
Long coastline of 3,260 km
Tropical zone:
(1) Northern (from Hai Van
Pass): humid tropical
monsoon climate with 4
seasons;
(2) Southern: moderate
tropical with dry and rainy
seasons.
Source: MOFA, DOSM under
MONRE

People

Multi-ethnic country with 54 ethnic groups
Kinh people account for 86% of the population.
The most populous minorities are Tay, Thai, Muong,
Hoa, Khmer, and Nung
Each ethnicity has its own culture, thus, the
Vietnamese culture is diversified
The most popular custom is ancestor worship
Major religions: Buddhism, Catholicism ...
Source: MOFA

Economy
GDP (nominal, 2017):
US$223 billions

GDP per capita (nominal,
2017): US$ 2,385

Source: GSO

Economy
Major sectors (Source: GSO):

Economy
Total investment in the
Economy in 2017
Total: ~USD 73bil.
Equals to 33%GDP

(Source: GSO)

Currency
Currency:VND
(Vietnam Dong)

Banknote samples

Current forex rate:
~22,800VND/1USD

Source: SBV, VCB,
Vietnamnet

Tourism
Total foreign tourists in
2017: 12,922,200

Number of tourist by
regions (in thousand)

Source: GSO

Tourism
Scenery of
Vietnam:
PhongNha Cave

Tourism
Scenery of
Vietnam:
TrangAn (old
capital)

Securities Market
HISTORY :
1993: Capital Market Development Board under the State Bank of Vietnam
(SBV) was set up to research and prepare for the establishment of the
securities market
1996: Establishment of the SSC as a governmental agency with 08 divisions
1998: Prepared to set up 02 Securities Trading Centers (STCs) in Hanoi
(HASTC) and in Ho Chi Minh City (HOSTC)
2000: HOSTC was inaugurated and first trading session
2004: SSC was placed under the management of the Ministry of Finance
2005: HASTC was inaugurated
2006: First Securities Law was promulgated
2017: Derivatives Market started
2018: Proposal to revise Securities Law for next stage of development

Government

                        Ministry of
                      Finance (MOF)

                      State Securities
                     Commission (SSC)

                               Hanoi Stock
                             Exchange (HNX)
Vietnam Securities
Depository (VSD)
                              Hochiminh City
                              Stock Exchange
                              (HSX or HOSE)

SSC
Organization

Functions
Government: Approve Long-term Development Strategy, issue Decree
MOF: Approve Annual Plan, issue Circular
SSC: Overall supervision, licensing, inspection and administrative penalty
HSX: List stocks of mostly large companies, investment fund certificates
HNX: List stocks of mostly small and medium companies; organize
trading platform for unlisted public companies (Upcom); auction and
trade government bond; derivatives
VSD: Stock deposit, clearing; CCP for derivatives
SBV: Settlement for Government bonds
BIDV: Settlement for Stocks

Current situation
                                              2000              2017
Capitalization/GDP (%)                         0.3                70.2

Number of listed securities                    5                 2,037

                                               5      1.426 (732 listed, 690 Upcom,
▪   Stocks /Certificates
                                                          02 ETF, 02 Certificate)

▪   Bonds                                      0        610 (571 Gov., 39 Corp.)

▪ Derivative                                    -           1 (VN30 Future)

Average traded value per session (mil. USD)   0.06                220

Indirect foreign portfolio value (bil. USD)     -                 32.9

Number of brokerage firms                      7                   85

Number of fund management firms                0                   46

Number of funds                                0                   36

Value of managed asset (bil. USD)               -                  10

Number of investor accounts                   2,997    1,921,554 (22,561 foreign)

Current situation
Major Indexes Movement in 2017 (Source: SSC annual report)

Current situation
Percentage in the total market capitalization (Source: SSC annual report)

Current situation
- Policies:
Drafting new Securities Law
Plan to consolidate 2 stock exchanges
Continue measures to upgrade to emerging-market status at MSCI

- Some challenges:
Improve corporate governance
Effective enforcement of laws and regulations
Protect investor

Introductory Presentation
Chapter II- Enforcement

Supervision

                 Dept. of      Dept. of       Dept. of
    MSD           Public      Brokerage         Fund         Exchanges
                Companies       Firm         Management

                 Reporting
                    and                                      Reporting of
   Insider      Corporate                                       listed
   trading      Governance                                   companies/
                 of Public                                    members
                Companies     Compliance      Compliance
                                   of           of Fund
                              Brokers/Bro     Managers/Fir
                              kerage Firms         ms          Reporting of
                 Approved                                     transaction of
                Auditors/Au                                  internal person
 Manipulation                                                (directors, chief
                  diting                                      accountant …
                Companies                                        and their
                                                                 relatives)

Inspection/Examination

                 Dept. of      Dept. of      Dept. of
    MSD           Public      Brokerage        Fund        Inspectorate
                Companies       Firm        Management

                                                             Inspection
                Examination   Examination    Examination        and
 Examination                                 periodic/by    Examination
                periodic/by   periodic/by
   by case                                      case
                   case          case                       Periodic/by
                                                                case

                  Public
   Insider                                      Fund
                Companies,    Brokerage
   trading,                                  Management         All
                 Auditing       Firms
 Manipulation                                  Firms
                Companies

Violation Handling

                Dept. of        Dept. of        Dept. of
   MSD           Public        Brokerage          Fund          Inspectorate
               Companies         Firm          Management

                                                                  Cease and
                                                                 desist order
  Refer to       Refer to        Refer to         Refer to
Inspectorate   Inspectorate    Inspectorate     Inspectorate       Impose
                                                                administrative
                                                                     fines

                Cease and       Cease and        Cease and
               desist order,   desist order,    desist order,
                                suspend of       suspend of      Refer to Police
                disapprove
                of auditing      licensed         licensed
                                operation        operation

Violation Handling

04 securities violation considered crimes (Criminal Code
of 2015)
(1) Provision of false information or concealment of
information in securities activities:
Any person who deliberately provides false information or
conceals information in offering, listing, trading securities,
market organization, registration, depositing, clearing, or paying
for securities in any of the following cases:
a) The loss incurred by investors is from VND 1bil
     (US$45,000);
b) b) The illegal profit is from VND 500mil (US$22,500);
c) c) The offender previously incurred a civil penalty for the
     same offence.

Violation Handling

04 securities violation considered crimes (Criminal
Code of 2015)
(2) Use of inside information for trading securities:
Any person who has information about a public company or
public fund which has not been published and could
remarkably affect securities price of that public company or
public fund but and uses such information to deal in securities
or discloses it or provides it for another person for trading
securities and:
- earns an illegal profit of from VND 300 mil.(US$14,000)
- or causes a loss to investors of from VND 500mil
   (US$22,500)

Violation Handling

04 securities violation considered crimes (Criminal
Code of 2015)
(3) Manipulation of securities market
A person who deliberately commits any of the (manipulating)
acts and: earns a profit of from VND 500mil (US$22,500) or
causes a loss to investors of from VND 1bil. (US$ 45,000)
(4) Forging documents in offering or listing profile
A person who forges documents of the offering or listing profile
and: earns a profit of from VND 1bil.(US$45,000) or causes a
loss to investors from VND 1bil.(US$45,000)

Punitive Measures
Administrative sanction:
- Main sanction: warning (lesser violation), money
  fines up to VND 2bil (US$90,000) for companies
  and VND 1bil (US$45,000) for individuals;
  suspension of licensed operation (representative
  office of brokerage firms, fund management firms)
  or licensed practioners, up to 24 months.
- Additional sanction: suspension of licensed
  operation (listing, business, tender offer…), up to
  24 months; confiscation of violating instruments
- Remedy: forced to make remedy measures
  (disclosure correction, withdraw the issued share
  and refund the buyer…)

Punitive Measures
Administrative sanction:

                                2014   2015   2016   2017
Public, Listed Companies         50     44     56    122
Manipulation, Insider trading    2      4      6      7
Major shareholder, internal      33     60     51    199
share holders
Brokerage, Fund Firms            33     29     14     21
Others                           3      13
Total                           121    150    133    349

Punitive Measures
Criminal sanction:
Individual:
- Imprisonment up to 7 years;
- Fined of money up to VND5 Bil.
- Prohibited from taking certain profession, position

Starting from Jan. 1st 2018: criminal sanction on legal
entity for crimes from (1) to (3).

Challenges for enforcement
-   Lacks the power to effectively collect evidence,
    proof
-   Challenges in cases involving cross-border
    violation (committed by foreigners or foreign
    entities)
-   Connection between the brokers and violators in
    market manipulation cases

Current situation
Proposing changes in Securities Law to address those
issues:
- Enhance the power of SSC: powers to collect
    information, evidence from 3rd parties, banking
    account, personal statement/declaration when
    conducting inspection, examination
- Authority in sharing and conducting
    investigative/inspective request from other
    Regulators within MMoU, thus could request
    cooperation of other Regulators in cross-border
    inspection
- Require securities firms/brokers to supervise and
    report suspected transactions

Those presented above are of my specific interest.

Looking toward learning more from JFSA, and all
other participants.

            THANK YOU VERY MUCH!

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