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Development history

1. THE COMING INTO BEING OF THE STATE SECURITIES COMMISSION (SSC)

Right from the early 1990s, the target of establishing and developing the securities market was laid out by Vietnams Party and Government so as to create a new channel of fund raising for development investment. Therefore, the project of research and establishment of the securities market was then participated by a number of government agencies and institutes, the results of which were later submitted to the Government.

As one of the preparatory steps towards kick-starting Vietnam’s securities market, the Capital Market Development Board under the State Bank of Vietnam (SBV) was then set up, as by its Governor’s Decision No. 207/QD-TCCB dated November 6, 1993, with the mission of researching, designing the project and preparing necessary conditions for the establishment of the securities market in clearly-defined phases. Under the authorization of the Government, the SBV collaborated with the Ministry of Finance to carry out their researches of issues relevant to the operation of the securities market, propose the suitable model of Vietnam’s securities market, provide part of the future regulatory staff with basic training in securities and securities market, study the actual operations of some securities markets in the region and the world, etc. However, as an agency under the SBV, the work of researching, building the project and determining the model of the securities market in Vietnam met with certain difficulties. Besides, securities is an industry that requires the cooperation and coordination of various organizations and industries. Consequently, in September 1994, the Government decided to set up the Board for Drafting the Decree-Law of Securities and Securities Market headed by a Vice Minister of Finance and assisted by a Deputy Governor of the SBV and a Vice-Minister of Justice. On the basis of the Boards project, the SBVs project and opinions gathered from relevant ministries and industries, the Prime Minister approved of the establishment of the Board for the Preparation of the Securities Market as by the his Decision No. 361/QD-TTg of June 29th, 1995, with a view to assisting him in giving guidelines for preparing necessary conditions for building up the securities market in Vietnam. This Board was assigned with responsibilities as follows:

- Drafting the first legal documents of securities and securities market.

- Drafting the Government’s Decree on the establishment of the SSC.

- Preparing infrastructure facilities and training the market regulatory officers and practitioners.

- Carrying out cooperation projects with other countries and international organizations in the field of setting up the securities market in Vietnam.

All of these steps were significant in the sense that they helped push ahead the process of organizing the securities market and the prerequisites for the establishment of a securities regulatory agency with well-defined functions.

Under the Government’s Decree No. 75/CP of November 28th, 1996, the SSC was set up as a governmental agency charged with the mission of organizing and regulating the operations in the field of securities and securities market. The establishment of this securities regulator prior to the actual functioning of the securities market itself proved to be an approach well in consistence with the general directives of building and developing the securities market in Vietnam and this determined the birth of the securities market over 03 years later.

As mentioned above, the SSC plays a decisive role in preparing necessary conditions for the setup of the securities market and at the same time it is its major job to organize and regulate the securities and securities market operations, with the focal mission of facilitating the process of fund mobilization for development investment, ensuring the orderly, safe, transparent, equitable and efficient operation of the securities market, and no less importantly, protecting investors’ legitimate rights and interests.

2. THE SSCS FUNCTIONS, DUTIES, POWERS AND ORGANIZATIONAL STRUCTURE AND SOME OF ITS MAJOR PERFORMANCE

2.1. The period of 1996-2003:

On November 28th, 1996, on behalf of the Government, the Prime Minister promulgated Decree No. 75/CP on the establishment of the SSC (hereinafter referred to as Decree No. 75), according to which the SSC was a governmental agency having full and complete functions, duties and powers of a securities regulator, exercising its supervisory and regulatory operations over the securities industry, helping push forward the development of the securities market, and protecting investors legitimate rights and interests. At the same time, the SSC was also the regulator of all public services in the securities industry. Therefore, the SSC was assigned with duties and powers as follows:

2.1.1. Drafting legal documents on securities and securities markets and submitting them to the competent authorities for ratification, and organizing the implementation of these documents once passed;

2.1.2. Collaborating with other ministries and industries to plan the building and development of the securities markets;

2.1.3. Granting, suspending or revoking various kinds of licenses of such market participants as securities houses, securities advisory companies, securities investment funds, fund management companies, issuing and listed organizations, and other securities-related organizations;

2.1.4. Permitting the establishment of service-providing and ancillary organizations and regulating them in compliance with applicable laws and regulations;

2.1.5. Submitting to the Prime Minister for the establishment, suspension or dissolution of the Stock Exchange;

2.1.6. Examining and supervising the operations of the Stock Exchange and other organizations related to securities issuance, trading and services;

2.1.7. Promulgating regulations and requirements on issuance and listing of securities and on information of securities transactions; discussing with the Ministry of Finance on fees and charges related to securities issuance and trading;

2.1.8. Providing specialized training and retaining to securities regulatory staff and practitioners;

2.1.9. Cooperating with international organizations and other countries in the field of securities and securities markets in compliance with applicable laws and the Governments guidelines;

2.1.10. Collaborating with other competent authorities in applying necessary measures to ensure the efficient and lawful operations of the securities markets;

2.1.11. Managing its human resources and infrastructure in compliance with the Governments regulations; and

2.1.12. Exercising other duties as assigned by the Prime Minister.

In accordance with this Decree, the organizational apparatus of the SSC was initially comprised of 08 units and divisions, namely:

- The Securities Market Development Department;

- The Securities Issuance Management Department;

- The Securities Business Management Department;

- The International Relations Department;

- The Personnel and Training Department;

- The Inspection Department;

- The Office of the SSC;

- The SSCs Representative Office in Ho Chi Minh City.

Later on, in order for the SSC to exercise new tasks and duties, the Prime Minister issued Decision No. 1038/1997/QD-TTg of December 05th, 1997 on the establishment of the Securities Science Research and Training Center and Decision No. 179/1998/QD-TTg of September 19th, 1998 on the establishment of the Finance and Accounting Department. Most importantly in this year, the Prime Ministers Decision No. 127/1998/QD-TTg of July 11th, 1998 pinpointed the coming into being of the two Securities Trading Centers (STCs), one in Hanoi and the other in Ho Chi Minh City. In agreement with the Governments Board of Organization and Personnel (now the Ministry of Home Affairs), the Chairman of the SSC made his decision to set up three other units: the Division of Legal Affairs, the Division of Information Technology, and the Securities Review.

The Decree No. 75 specified that the leadership of the SSC consisted of the Chairman and Vice-Chairmen, who are appointed by the Prime Minister, and other Ex-officio commissioners, who are Vice-Ministers of relevant ministries, such as Planning and Investment, Justice, Finance, and the State Bank of Vietnam. This model of leadership is suitable for specific conditions and situations of Vietnam by then, and at the same time helped bring into full play the comprehensive strengths of relevant authorities in regulating the new and sophisticated industry: securities and securities markets.

Following is the organizational chart of the SSC under the Governments Decree No. 75/CP and other Decisions by the Prime Minister:

THE ORGANIZATIONAL CHART OF THE STATE SECURITIES COMMISSION

(in accordance with the Decree No. 75)

The first Chairman of the SSC was Dr. Le Van Chau and his two deputies were Dr. Nguyen Duc Quang and Mr. Tran Xuan Ha. The ex-officio commissioners were Mrs. Le Thi Bang Tam, Vice-Minister of Finance; Mr. Lai Quang Thuc, Vice-Minister of Planning and Investment; Mr. Nguyen Ngoc Hien, Vice-Minister of Justice; and Mr. Le Duc Thuy, Deputy Governor of the State Bank of Vietnam.

In 2000, Dr. Nguyen Duc Quang was appointed Chairman of the SSC to replace Dr. Le Van Chau, who then became Advisor to the SSCs Chairman, and Dr. Vu Bang was appointed Vice-Chairman by the Prime Minister. Soon afterwards, Mr. Ha Hung Cuong, Vice-Minister of Justice replaced Mr. Nguyen Ngoc Hien, who took another job, and Mrs. Duong Thu Huong replaced Mr. Le Duc Thuy, who was then appointed Governor of the SBV.

To facilitate the SSCs implementation of its assigned tasks and duties, 57 officers from the SBV moved to the SSC and subsequently, several officers from the Ministry of Finance and other industries also became the SSCs first staff, all doubling their efforts and dedicating their fervent hearts and minds to the development of a new industry.

Though just established and having had to shoulder the task of building up and regulating a completely new industry, the SSC strove to work out the first legal framework governing the securities industry and to prepare all necessary conditions for the birth of the securities market. On July 20th, 2000, the Ho Chi Minh City Securities Trading Center (HOSTC) was officially inaugurated and a week later, the first trading session took place, making a considerable milestone in the formation and development of Vietnams securities markets. With a modest size and scope in its pilot period, the HOSTC did become an unprecedented financial institution in the transitional economy of Vietnam. This date now becomes Securities Day for all market participants to celebrate.

2.2. The period of 2003-2004:

So as to further consolidate the organizational apparatus of the SSC, the Government promulgated its Decree No. 90/2003/ND-CP dated August 08th, 2003 (hereinafter referred to as Decree No. 90) on the functions, duties, powers and organizational structure of the SSC, as a replacement of Decree No. 75. Over page is the SSCs organizational chart in accordance with Decree No. 90.

THE ORGANIZATIONAL CHART OF THE STATE SECURITIES COMMISSION

(in accordance with the Decree No. 90)

Under this Decree, the SSC was once again stipulated as a governmental agency to exercise the tasks and duties of the regulator and service-provider in the field of securities and securities markets. Accordingly, the SSCs duties and powers were made more appropriate with the requirement and development of the market in a new context. The SSCs duties and powers were as follows:

2.2.1. Submitting to the Government, the Prime Minister or the Minister authorized by the Prime Minister the legal documents of securities and securities market for approval and then organizing the implementation of those documents;

2.2.2. Submitting to the Government, the Prime Minister the strategy, orientation, programs, long-term, 5-year and annual plans, and other important projects of the SSC, and organizing the implementation of those after approval;

2.2.3. Issuing, giving guidelines to, examining and organizing the application of standards, processes, procedures, and economic and technical requirements applicable to units and organizations within the SSC as stipulated by applicable laws of securities and securities market;

2.2.4. Granting, extending, suspending or revoking licenses of securities issuance, securities listing or securities business and services, or licenses of securities business practitioners as stipulated by applicable laws;

2.2.5. Submitting to the Prime Minister for decision to establish, suspend the operation of, or disperse the Securities Trading Center, the Stock Exchange, and other organized securities market;

2.2.6. Organizing and managing the Securities Trading Center, the Stock Exchange and other organized securities market, and the centers for securities depository, registration, clearing and settlement;

2.2.7. Regulating all operations related to the securities market by securities issuers, listing organizations, securities business organizations and other ancillary institutions as stipulated by applicable laws;

2.2.8. Inspecting, examining and supervising all market participants and imposing sanctions to violations of securities and securities market laws as stipulated by applicable laws;

2.2.9. Managing all investment and construction projects under its authority as stipulated by applicable laws; participating in the process of evaluating important projects in the field of securities and securities market as requested by the Government or Prime Minister;

2.2.10. Giving guidelines to and creating favorable conditions for securities associations in pursuing their goals, missions and charters; examining the enforcement of regulations by these associations; imposing sanctions or proposing to other authorized governmental agencies the sanctions to violations committed by these securities associations as stipulated by applicable laws;

2.2.11. Conducting scientific researches in the field of securities and securities market; providing specialized training to officials and public servants of the SSC and its units, to securities practitioners and other market participants;

2.2.12. Providing information, propaganda and training in the field of securities and securities market to organizations and the public;

2.2.13. Conducting international cooperation in the field of securities and securities market as stipulated by applicable laws;

2.2.14. Giving decisions and guidelines for the implementation of the administrative reform program of the SSC, with the goals and contents approved by the Prime Minister;

2.2.15. Managing its organizational apparatus and personnel; implementing the salary policies as well as other policies of valence, rewards and punishment for its officials and public servants within its scope of authority;

2.2.16. Managing its assigned financial resources and assets and organizing the implementation of fiscal appropriations as stipulated by applicable laws;

2.2.17. Observing the reporting regime to the Government, the Prime Minister and other authorized agencies as stipulated by applicable laws.

Concerning the organizational structure of the SSC as stipulated by the Decree No. 90, there were some adjustments in compliance with its revised functions, duties and powers and in line with the Governments general regulations applied to governmental agencies. Therefore, the SSCs organizational apparatus would consist of:

a. The SSC’s departments assisting its Chairman in exercising regulatory powers in securities and securities markets, including:

- The Securities Market Development Department: assisting the Chairman in designing strategies and policies for development of securities markets;

- The Securities Issuance Management Department: assisting the Chairman in the management of securities issuance and listing;

- The Securities Business Management Department: assisting the Chairman in the management of the organization and operation of securities business and service organizations;

- The Legal Affairs Department: assisting the Chairman in exercising the regulatory powers through securities and securities market laws;

- The Inspection and Supervision Department: assisting the Chairman and exercising its powers in inspection and supervision of the enforcement of securities and securities market laws;

- The Planning - Finance Department: assisting the Chairman in the management of financial resources, accounting and construction work by the SSC’s units;

- The International Cooperation Department: assisting the Chairman in the issues of international cooperation and international integration in the field of securities and securities market;

- The Human Resources Department: assisting the Chairman in the implementation of policies of organizational apparatus, personnel and training for officials and public servants of the SSC;

- The Office of the SSC: assisting the Chairman in coordinating operations of the SSC and carrying out the administrative and logistic work of the SSC. The Office of the SSC has its representative branch in Ho Chi Minh City.

b. The SSC’s profit-seeking and service-providing organizations, including:

- The Hanoi Securities Trading Center (HASTC) and the Ho Chi Minh City Securities Trading Center (HOSTC): being profit-seeking and service-providing units, having their own legal status, with the functions and duties of organizing, regulating, managing and supervising securities trading on these Centers. The HASTC is located at No. 5-7, Trang Tien Street, Hoan Kiem District, Hanoi; The HOSTC is located at No. 45-47, Chuong Duong Road, District I, Ho Chi Minh City and was inaugurated on July 20, 2000.

- The Center for Information Technology and Statistics: being a profit-seeking and service-providing unit, having its own legal status, with the duties of assisting the SSC to exercise its regulatory powers in the field of information technology application in the securities industry and providing public services to organizations and individuals operating in the field of securities and securities market. The Center for Information Technology and Statistics is located at No. 164, Tran Quang Khai Street, Hoan Kiem District, Hanoi and has a branch in Ho Chi Minh City.

- The Securities Science Research and Training Center: being a profit-seeking and service-providing unit, having its own legal status, with the duties of assisting the SSC to exercise its regulatory powers in conducting the scientific research and training in the field of securities and securities market. The Securities Science Research and Training Center is located at No. 2, Phan Chu Trinh Street, Hoan Kiem District, Hanoi (temporarily) and has its branch in Ho Chi Minh City.

- The Vietnam Securities Review: being a profit-seeking and service-providing unit, having its own legal status, with the duties of assisting the SSC to exercise its regulatory powers in communication and propaganda in the field of securities and securities market.

The Vietnam Securities Review is located at No. 164, Tran Quang Khai Street, Hoan Kiem District, Hanoi and has its Representative Office in Ho Chi Minh City.

c. The SSC’s leadership includes:

- Its Chairman and Vice-Chairmen, who are appointed by the Prime Minister;

- Ex-officio commissioners, who are Vice-Ministers of Planning and Investment, Finance, Justice, and SBV and these commissioners are assigned by the Prime Minister.

In this period, the posts of Chairman and Vice-Chairmen did not change, except in January 2004, Mr. Nguyen Doan Hung, a Director from the SBV, was appointed by the Prime Minister to be Vice-Chairman of the SSC. As for commissioners, Mr. Nguyen The Lien, Vice-Minister of Justice replaced Mr. Ha Hung Cuong, who moved to another job, and Mr. Phung Khac Ke, Deputy Governor of the SBV, replaced Mrs. Duong Thu Huong, who became Vice-Chairperson of the Economic and Budget Committee of the National Assembly - Parliament).

Regarding human resources, the SSC by then boasted of a 337-strong staff, of which 14 had Doctor’s Degrees, 54 Master’s Degrees, 202 Bachelor’s Degrees, and 47 were doing their post-graduate courses both domestically and abroad. It is this personnel which played the vital role in implementing the SSC’s assignments, helping ensure the safety and efficiency of the securities market over the past 04 years.

2.3. The period from April 2004 to date:

So as to make the collaboration among ministries and industries more efficient in pacing up the development of the securities market, on February 19th, 2004, the Government promulgated its Decree No. 66/2004/ND-CP, according to which the SSC would be moved into and under the management of the Ministry of Finance. The process of transfer was completed on March 16th, 2004 with the participation and witness of leaders of the Ministry of Finance, the SSC and relevant ministries. Under the regulation of this Decree and the Prime Minister’s Decision No. 161/2004/QD-TTg dated September 07th, 2004, the SSC’s functions and duties had to undergo some adjustment and revision. As a result, the SSC would be an organization under the Ministry of Finance, exercising the assigned tasks and duties of the regulator and service-provider in the field of securities and securities markets.

Following is the SSCs organizational chart in accordance with the Decision No. 161/2004/QD-TTg by the Prime Minister (hereinafter referred to as Decision No. 161)

THE ORGANIZATIONAL CHART OF THE STATE SECURITIES COMMISSION

(in accordance with the Decision No. 161)

The revised tasks and duties of the SSC were as follows:

2.3.1 Designing and submitting to the Minister of Finance legal documents of securities and securities market, the strategies, matrixes, long-term, 5-year, and annual plans on securities and securities market;

2.3.2 Proposing the Minister of Finance to set up, suspend the operation of, or disperse the Securities Trading Center, the Stock Exchange, the Securities Central Depository and other organizations related to securities activities and securities trading in his authorization, or proposing the Minister of Finance to consider and submit to the Prime Minister the plans to set up, suspend the operation of or disperse the above-mentioned entities;

2.3.3 Implementing the legal documents, strategies, matrixes, and plans on securities and securities market after their ratification;

2.3.4 Setting specialized standards, procedures and processes, economic and technical specifications to be applied in organizations and units under its management, as stipulated by applicable laws and decided by the Minister of Finance;

2.3.5 Issuing, extending, suspending or revoking certificates of registration of securities issuance, registration of securities trading, certificates of securities listing, certificates of securities business, certificates of securities practices and services, as stipulated by applicable laws;

2.3.6 Organizing and managing the Securities Trading Center, the Stock Exchange, other regulated securities markets, and the Center for Securities Depository, Registration, Clearing and Settlement;

2.3.7 Supervising the compliance of regulations of securities and securities market by organizations offering their securities to the public, organizations having their securities listed, securities business organizations and other ancillary organizations, as stipulated by applicable laws;

2.3.8 Implementing the inspection, examination and supervision of organizations and individuals participating in the securities market and applying sanctions for violations of regulations of securities and securities market, as stipulated by applicable laws;

2.3.9 Giving guidelines and creating favorable conditions for securities associations to abide by their objectives, missions and charters; supervising the compliance of regulations of securities and securities market of these associations; applying sanctions or proposing authorized agencies to apply sanctions for violations of laws by these associations, as stipulated by applicable laws and assigned by the Minister of Finance;

2.3.10 Complying the reporting regime on securities and securities market, as stipulated by applicable laws and assigned by the Minister of Finance;

2.3.11 Carrying out international cooperation programs in the fields of securities and securities market, as stipulated by applicable laws and assigned by the Minister of Finance;

2.3.12 Implementing the SSCs administrative reforms in accordance with the objectives and contents as approved by the Minister of Finance;

2.3.13 Carrying out forecasting and analytical work, communication, propaganda, dissemination and training in the fields of securities and securities market for institutions and individuals participating in the securities market;

2.3.14 Organizing scientific research works in securities and securities market;

2.3.15 Introducing, managing and applying information technologies; modernizing the management of securities and securities market as stipulated by applicable laws and assigned by the Minister of Finance;

2.3.16 Managing the organizational apparatus and human resources; organizing training and retraining programs and applying appropriate policies for the SSCs human resources as stipulated by applicable laws and assigned by the Minister of Finance;

2.3.17 Managing its budget and assets as stipulated by applicable laws and assigned by the Minister of Finance;

2.3.18 Accomplishing other duties assigned by the Minister of Finance.

Regarding the organizational structure, there was some change in the status of all SSC’s departments and divisions; and the Division of Information Technology was changed into the Center for Information Technology and Statistics. Subsequently, the Minister of Finance signed his Decision No. 3595/QD-BTC of November 04th, 2004 on the duties, powers and organizational structure of the SSC’s departments. Up to this moment, the SSC’s leadership would not include the ex-officio commissioners as mentioned above, and Mr. Tran Xuan Ha became Acting Chairman of the SSC to replace Dr. Nguyen Duc Quang, who ceased his post pending retirement.

The transfer of the SSC into the Ministry of Finance appeared to be an appropriate step in the process of developing the securities markets in Vietnam. With the role and functions of the macro-financial policy-maker and the regulator of the financial markets, the Ministry of Finance would be more responsive and efficient in working out and issuing regulatory policies. Consequently, a large amount of quality products and instruments would be supplied to the securities markets, which proved to be the key issue of the development of the securities markets in Vietnam at the moment. At the same time, other financial policies initiated by the Ministry of Finance (such as those of bond issuance, fees and charges, etc.) would help strengthen the uniformity and consistency of and ensure the safety for the development of the securities and other financial markets.

Besides, the change in the status of the SSC in particular and other governmental agencies in general is well in line with the Government’s Masterplan of administrative reforms for the period of 2001-2010, with the goal of reforming the administrative apparatus and the content of "readjusting the functions and duties of the Government, ministries and ministerial-level agencies, governmental agencies and local governments of all levels in consistence with the role of the State in the new situation".

3. DUTIES, POWERS AND ORGANIZATIONAL STRUCTURE OF THE DEPARTMENTS, INSPECTION DEPARTMENT AND OFFICE OF THE SSC

As mentioned above, the Minister of Finance signed Decision No. 3595/QD-BTC of November 04th, 2004 on the duties, powers and organizational structure of the specialized departments, Office and Inspection Department of the SSC, in which it is generally stipulated that these units are in the apparatus to assist the SSCs Chairman in implementing all the duties and powers as specified in the Prime Ministers Decision No. 161, as well as other duties and powers assigned by the Minister of Finance. Specifically, the duties and powers of each unit are as follows:

3.1 The Securities Market Development Department:

3.1.1 Working by itself or collaborating with relevant departments to draft and then organize the implementation of legal documents and their guidance on securities trading on organized securities markets;

3.1.2 Working by itself or collaborating with relevant departments to organize the implementation of strategies, masterplans, long-term, 5-year and annual plans of development of securities markets, and projects of organization and operation of organized securities markets;

3.1.3 Taking part in drafting policies and regimes of taxes, fees, charges, and foreign exchange, and other policies and solutions towards securities markets, as assigned by the SSCs Chairman;

3.1.4 Collaborating with other departments of the SSC to organize the implementation, supervision and examination of the enforcement of legal regulations on the organization and management of securities trading on the Securities Trading Centers (STCs) and the Stock Exchanges;

3.1.5 Proposing solutions for the development of securities markets, ensuring the publicity, equitability and legality of the market operations;

3.1.6 Collaborating with other departments of the SSC to set up the securities market information system for the sake of mapping out polices of securities market development and management; preparing periodical and irregular reports on the operations of the securities markets at the disposal of the SSCs Chairman and request of the Minister of Finance;

3.1.7 Making the SSCs annual reports;

3.1.8 Accomplishing other duties assigned by the SSCs Chairman.

3.2 The Securities Issuance Management Department:

3.2.1 Working by itself or collaborating together with relevant departments to draft and then organize the implementation of legal documents and their guidance on issuance and listing of stocks and bonds;

3.2.2 Working by itself or collaborating with relevant departments to organize the implementation of strategies, long-term and annual plans of development of securities for the markets;

3.2.3 Building up and providing guidance for the implementation of specialized standards, procedures and processes related to issuance and listing of stocks and bonds;

3.2.4 Working by itself or collaborating with relevant departments of the SSC to organize the supervision and examination of the compliance of legal documents on the public issuance of stocks and bonds by issuing organizations and the listing of stocks and bonds by listed organizations;

3.2.5 Collaborating with relevant departments of the SSC to examine and supervise organizations having their stocks and bonds issued and listed in their maintenance of listing requirements, their disclosure of information and corporate governance;

3.2.6 Receiving and verifying application statements for issuing stocks and bonds, applications for listing of stocks and bonds; submitting documents to the SSCs Chairman for granting, suspension or revocation of certificates of issuance registration of organizations applying for securities issuance; submitting documents to the SSCs Chairman for granting or revocation of listing licenses of organizations having their stocks and bonds listed; keeping track, gathering information and providing analysis of the operations of issuing and listed organizations;

3.2.7 Receiving and verifying applications of auditing organizations having satisfied all requirements for auditing securities issuing, listed and business organizations; submitting those documents to the SSCs Chairman for approval;

3.2.8 Collaborating with other departments of the SSC and relevant departments and organizations of the Ministry of Finance to work out policies and solutions for development and encouragement of organizations having their securities issued to the public and listed on the STCs or the Stock Exchange;

3.2.9 Accomplishing other duties assigned by the SSCs Chairman.

3.3 The Securities Business Management Department:

3.3.1 Working by itself to draft and then organize the implementation of legal documents and their guidance on the organization and operation of securities business and service-providing organizations;

3.3.2 Working by itself to organize the implementation of policies, strategies, long-term and annual plans and projects on the organization and operation of securities business and service-providing organizations;

3.3.3 Working by itself or collaborating with relevant departments of the SSC to organize the supervision and examination of the compliance of legal documents and other regulations on securities business and service providing; the public issuance of stocks and bonds by issuing organizations and the listing of stocks and bonds by listed organizations; keeping track, gathering information and providing analysis of the operations of securities business and service-providing organizations;

3.3.4 Verifying application statements and submitting those documents to the SSCs Chairman for granting or revocation of licenses of operation of securities business and service-providing organizations, licenses of establishment of investment funds and licenses of issuance of fund certificates, certificates of securities business practice of securities business and service-providing organizations and their practitioners;

3.3.5 Verifying application statements and submitting those documents to the SSCs Chairman for granting or revocation of licenses of establishment of representative offices of foreign securities business and service-providing organizations in Vietnam; supervising the operations of these representative offices in compliance with applicable laws and regulations;

3.3.6 Collaborating with other relevant departments of the SSC to organize examinations for re-granting of certificates of securities business practice;

3.3.7 Collaborating with other relevant departments of the SSC to select auditing companies to provide auditing services to securities business and service-providing organizations;

3.3.8 Providing consultancy to the SSCs Chairman in giving guidance and assistance to securities associations in achieving their goals and mottos and complying with their Charters; supervising the compliance of legal regulations by these associations;

3.3.9 Collaborating with domestic and foreign organizations in promoting the development of securities business and service-providing organizations in accordance with directives by the Ministry of Finance and decisions by the SSCs Chairman;

3.3.10 Accomplishing other duties assigned by the SSCs Chairman.

3.4 The International Cooperation Department:

3.4.1. Working by itself to build up and then organize the implementation of the SSCs strategies, long-term and annual plans and projects of international cooperation;

3.4.2. Collaborating with other departments of the SSC and organizations of the Ministry of Finance to participate in the latters international cooperation programs in the field of securities and securities markets as assigned by the SSCs Chairman and the Minister of Finances directives;

3.4.3. Collaborating with other departments of the SSC to build up the Regulation on the SSCs international operations, providing guidance and examining the implementation of this Regulation as stipulated by the Minister of Finance;

3.4.4. Collaborating with international organizations, foreign securities regulators, and other departments of the SSC to implement programs and technical assistance projects as assigned and authorized by the Minister of Finance; making synthesis and reports on the implementation of these programs and projects;

3.4.5. Preparing the contents and completing procedures for the SSC to directly partake or collaborate with other organizations of the Ministry of Finance to discuss and sign agreements or memoranda of understanding of cooperation with foreign partners in the field of securities and securities markets; to discuss and sign documents of accession to international organizations of securities and securities markets as stipulated by the Minister of Finance;

3.4.6. Collaborating with other departments of the SSC to prepare the contents, programs, plans, budget and international procedures for the SSCs delegations to take part in international workshops, conferences and study tours, and the programs for international delegations to pay working visits to the SSC;

3.4.7. Collaborating with other departments of the SSC to organize and manage international workshops and conferences in accordance with approved plans; making reports of their results in accordance with the Minister of Finances directives;

3.4.8. Conducting the interpretation work as specified in the SSCs Regulation of international operations; carrying out the study and synthesis of news of worlds securities markets and regulation of the securities industry at the service of the SSCs leadership in accordance with the Minister of Finances directives;

3.4.9. Accomplishing other duties assigned by the SSCs Chairman.

3.5 The Human Resources Management Department:

3.5.1 Working out the strategy of the organizational structure and development of the human resources in the securities industry;

3.5.2 Studying and proposing functions, duties, powers and organizational structure of the SSC and its departments;

3.5.3 Managing and distributing the assigned amount of the SSCs salaried staff; conducting the work of recruitment, appointment, increase of the staffs levels and their salary as authorized by the Minister of Finance;

3.5.4 Exercising the work of staff planning, rotation, appointment, re-appointment, dismissal, punishment, transfer, retirement, resignation, and implementing other policies and regimes towards officers, employees and contractees under the management of the SSC as authorized by the Minister of Finance;

3.5.5 Managing the personal files of officers and employees of the SSC as authorized by the Minister of Finance, providing guidance to other organizations of the SSC to keep the personal files and archives of their employees and contractees as stipulated by applicable laws;

3.5.6 Working out programs, plans and projects of staff training for the SSC’s officers and collaborating with other relevant departments to implement those programs, plans and projects; managing, keeping track of and urging the compliance of regulations on sending the SSC’s staff to domestic and foreign study courses with domestic or foreign financial sources;

3.5.7 Implementing the work of internal political security as assigned by the Minister of Finance;

3.5.8 Working by itself or collaborating with relevant parties to handle proposals, appellations or denunciations related to human resources management as stipulated by applicable laws;

3.5.9 Accomplishing other duties assigned by the SSCs Chairman.

3.6 The Planning - Finance Department:

Exercising the Government’s regulations and the Minister of Finance’s authorization on financial management, expenditure management, budget for capital construction and the assets of all the SSC’s organizations:

3.6.1 Working out annual budget and plans of utilizing the centralized financial sources of the SSC and its departments;

3.6.2 Submitting to the SSC’s Chairman the plans of expenditure allocation and the budget for capital construction for the SSC’s departments in accordance with its approved budget and projects;

3.6.3 Making reports on the budget revenues and expenditures as stipulated by applicable laws and regulations; reporting to the SSC’s Chairman and submitting to the Ministry of Finance for approval, and making public all annual reports of revenues and expenditures of all the SSC’s departments;

3.6.4 Providing guidance and examination of the compliance of the financial and accounting regimes and other Government’s and Ministry of Finance’s regulations on purchase, management and utilization of public assets in the SSC’s departments;

3.6.5 Participating in the drafting, amendment and revision of legal documents on finance and accounting applied in the field of securities and securities markets;

3.6.6 Managing the financial sources for capital construction in accordance with applicable laws and regulations and the Ministry of Finance’s guidance;

3.6.7 Collaborating with other departments and organizations to organize retraining courses for the SSC’s staff working in the field of finance, accounting and capital construction investment;

3.6.8 Accomplishing other duties assigned by the SSCs Chairman.

3.7 The Legal Affairs Department:

3.7.1 Working by itself or collaborating with other departments to draft legal documents in the field of securities and securities markets; requesting central agencies and local governments to contribute their opinions towards legal documents on securities and securities markets drafted by the SSC;

3.7.2 Working out the SSC’s annual and long-term programs and plans of drafting legal documents on securities and securities markets, and organizing the implementation of those programs and plans;

3.7.3 Contributing its opinions and verification of the legality of legal documents and their guidance drafted by the SSC’s departments prior to submission of these documents to the Ministry of Finance;

3.7.4 Collaborating with other departments of the SSC to prepare files for draft legal documents on securities and securities markets for the SSC’s Chairman to request the Ministry of Finance’s departments and organizations for verification and submission to the Minister of Finance;

3.7.5 Providing consultancy to the SSC’s Chairman in contributing his opinions to legal documents drafted by the Ministry of Finance’s departments and organizations and other central agencies;

3.7.6 Collaborating with other departments of the SSC to provide proposals to the SSC’s Chairman in order to submit those to the Minister of Finance so that the latter shall suggest other competent authorities to suspend the implementation of, or to amend or revise the legal documents promulgated by these competent authorities which have provisions contradictory, overlapping or inconsistent with the legal documents on securities and securities markets;

3.7.7 Going through and systematizing all legal documents on securities and securities markets, and proposing solutions to the discovered problems; collaborating with other departments to publish legal documents on securities and securities markets;

3.7.8 Collaborating with other departments and organizations of the SSC and those of the Ministry of Finance to organize the publication, dissemination and education of legal documents on securities and securities markets; supervising, examining and urging the compliance of legal documents on securities and securities markets; participating in proposing settlement of violations in regulations on securities and securities markets;

3.7.9 Providing guidance and response to organizations’ and individuals’ inquiries related to securities and securities markets upon request and at the disposal of the SSC’s Chairman;

3.7.10 Accomplishing other duties assigned by the SSCs Chairman.

3.8 The Office of the SSC:

3.8.1 Working out the SSC’s periodical programs and plans of actions; making announcement and keeping track of these programs and plans, urging other departments and assisting the SSC’s Chairman to coordinate the operations of the SSC’s departments in implementing those programs and plans after their approval;

3.8.2 Preparing programs, contents, and materials for interim and final meetings and conferences presided over by the SSC’s leadership, making public the results of those meetings and conferences; collaborating with other departments of the SSC to organize conferences and workshops;

3.8.3 Working by itself or collaborating with other departments of the SSC to set up the SSCs Working Regulation, urging and supervising the compliance of this Regulation;

3.8.4 Conducting the work of propaganda and dissemination of the SSCs official information on the mass media; collaborating with other departments of the SSC to publish annual reports and legal documents and their guidance on securities and securities markets;

3.8.5 Organizing, managing and providing guidance of the administrative, archive, health care and library work of the SSC;

3.8.6 Managing the infrastructure and ensuring all the means and working conditions of the SSC; conducting the self-protection and security work for the office of the SSC;

3.8.7 Exercising the duties of the third-level budget-receiving organization in compliance with the regulations on States budget management;

3.8.8 Acting as the owner of infrastructure and technical construction projects of the SSC in accordance with the Minister of Finances directives and the SSCs Chairmans decisions;

3.8.9 Acting as the standing member of the SSCs Council for Emulation and Rewards;

3.8.10 Accomplishing other duties assigned by the SSCs Chairman.

3.9 The Inspection Department:

3.9.1 Exercising the duties and powers of the Securities Inspection as stipulated by applicable laws and regulations, and as authorized by the Minister of Finance and the SSCs Chairman;

3.9.2 Accomplishing other duties assigned by the SSCs Chairman.

4. DUTIES AND POWERS OF THE SSC’S PROFIT-MAKING AND SERVICE-PROVIDING UNITS

4.1 The Hanoi Securities Trading Center:

The Hanoi Securities Trading Center (HASTC) has its duties and powers in compliance with Articles 61, 62 and 63 of the Governments Decree No. 144/2003/ND-CP dated November 28th, 2003 on securities and securities markets and the SSCs Chairmans Decision No. 329/QD-UBCK the dated December 17th, 2003 as follows:

4.1.1 Organizing, managing and supervising the operations on the HASTC;

4.1.2 Managing and operating the trading system of the HASTC;

4.1.3 Managing and supervising the listing of securities;

4.1.4 Managing and supervising the operations of the HASTC’s members and other ancillary organizations as stipulated by applicable laws and regulations;

4.1.5 Organizing, managing and conducting the disclosure of market information; providing information services as stipulated by applicable laws and regulations;

4.1.6 Providing securities registration, depository, clearing and settlement services as stipulated by the SSC’s Chairman’s directives until an independent Securities Depository Center is established;

4.1.7 Promulgating, providing guidance to, examining and organizing the implementation of specialized procedures and processes applied on the HASTC;

4.1.8 Discovering and proposing forms of handling violations of regulations on securities and securities markets as stipulated by applicable laws and regulations;

4.1.9 Collaborating with other specialized departments of the SSC to submit to the SSC’s Chairman suggestions and solutions to stabilize and develop market activities;

4.1.10 Collecting fees as stipulated by applicable laws and regulations;

4.1.11 Establishing and managing the Compensation Supporting Fund as stipulated by applicable laws and regulations;

4.1.12 Acting as an intermediary upon request to reconcile among parties in disputes related to listed securities;

4.1.13 Exercising the reporting, statistical, accounting and auditing regimes, and managing the HASTC’s assets as stipulated by applicable laws and regulations;

4.1.14 Conducting the international cooperation in the field of securities and securities markets as stipulated by the SSC’s Chairman’s directives;

4.1.15 Accomplishing other duties as assigned by the SSC’s Chairman.

4.2 The Ho Chi Minh City Securities Trading Center:

The Ho Chi Minh City Securities Trading Center (HOSTC) has its duties and powers in compliance with Articles 61, 62 and 63 of Decree No. 144/2003/ND-CP dated November 28th, 2003 on securities and securities markets and the Decision No. 328/QD-UBCK by the SSCs Chairman dated December 17th, 2003 as follows:

4.2.1 Organizing, managing and supervising the operations of the HOSTC;

4.2.2 Managing and operating the trading system of the HOSTC;

4.2.3 Managing and supervising the listing of securities;

4.2.4 Managing and supervising the operations of the HOSTC’s members and other ancillary organizations as stipulated by applicable laws and regulations;

4.2.5 Organizing, managing and conducting the disclosure of market information; providing information services as stipulated by applicable laws and regulations;

4.2.6 Providing securities registration, depository, clearing and settlement services as stipulated by the SSC’s Chairman’s directives until an independent Securities Depository Center is established;

4.2.7 Promulgating, providing guidance to, examining and organizing the implementation of specialized procedures and processes applied on the HASTC;

4.2.8 Discovering and proposing forms of handling violations of regulations on securities and securities markets as stipulated by applicable laws and regulations;

4.2.9 Collaborating with other specialized departments of the SSC to submit to the SSC’s Chairman suggestions and solutions to stabilize and develop market activities;

4.2.10 Collecting fees as stipulated by applicable laws and regulations;

4.2.11 Establishing and managing the Compensation Supporting Fund as stipulated by applicable laws and regulations;

4.2.12 Acting as an intermediary upon request to reconcile among parties in disputes related to listed securities;

4.2.13 Exercising the reporting, statistical, accounting and auditing regimes, and managing the HOSTC’s assets as stipulated by applicable laws and regulations;

4.2.14 Conducting the international cooperation in the field of securities and securities markets as stipulated by the SSC’s Chairman’s directives;

4.2.15 Accomplishing other duties as assigned by the SSC’s Chairman.

4.3 The Securities Science Research and Training Center:

The Securities Science Research and Training Center (SSRTC) has its duties and powers in compliance with the Decision No. 330/QD-UBCK by the SSCs Chairman dated December 17th, 2003 as follows:

4.3.1 Managing the SSC’s scientific research works in the field of securities and securities markets;

4.3.2 Working out the SSC’s long-term and annual programs and plans of scientific research, submitting these to the SSC’s Chairman and organizing the implementation of these after their ratification;

4.3.3 Organizing scientific workshops and providing information and scientific data on securities and securities markets; collaborating with departments of the SSC and other research institutions to implement and apply scientific research results and achievements in operations in the securities industry;

4.3.4 Providing the SSCs staff with specialized training courses, training courses conducive to granting securities managers and practitioners with certificates of securities practice, in accordance with the approved training programs conducive to granting of certificates of securities practice, and training course for other market participants;

4.3.5 Collaborating with other relevant departments and units of the SSC to provide information and disseminate knowledge of securities and securities markets to other organizations and the public;

4.3.6 Compiling, translating and publishing materials, textbooks and other publications for research, study and training in the field of securities and securities markets;

4.3.7 Cooperating with domestic and foreign scientific and training institutions for research, study and update of knowledge of securities and securities markets in compliance with applicable laws and regulations and the SSCs Chairmans directives;

4.3.8 Accomplishing other duties as assigned by the SSC’s Chairman.

4.4 The Center of Securities Information and Statistics:

The Center of Securities Information and Statistics (CSIS) has its duties and powers in compliance with the Decision No. 22/QD-UBCK by the SSCs Chairman dated February 03rd, 2004 as follows:

4.4.1 Drafting and submitting to the SSCs Chairman the long-term and annual programs of development of the information technology in the field of securities and securities markets, and organizing the implementation of these programs after their approval;

4.4.2 Drafting and submitting the SSCs Chairman for promulgation of standards, procedures and economic - technical specifications applicable in the SSCs organizations and units, and providing guidance for the implementation of these standards, procedures and economic - technical specifications;

4.4.3 Collaborating with relevant organizations to work out and implement programs and projects of application of information technology in operations in the field of securities and securities markets;

4.4.4 Receiving and transferring technologies; managing and operating information technology systems given to the SSC by the Governments projects or by domestic or foreign organizations in accordance with the SSCs Chairmans decisions;

4.4.5 Building, operating, developing, maintaining and managing the SSCs information systems and information technology infrastructure; managing and operating the SSCs internal information network;

4.4.6 Assisting the SSCs Steering Board of the Project of Computerization of Administrative Management in implementing this Project in the SSC;

4.4.7 Building, managing and operating the SSCs Database Center; gathering, retrieving, processing and exploiting data in the field of securities and securities markets; ensuring security and confidentiality of the SSCs information system and electronic database;

4.4.8 Cooperating with other relevant departments and units of the SSC to organize scientific research and provide training courses of information technology to the SSCs staff and other organizations and individuals taking part in the securities industry; organizing workshops and conferences of application of information technology in the securities industry;

4.4.9 Cooperating with domestic and foreign organizations involved in application of information technology in the field of securities and securities markets in compliance with applicable laws and regulations and the SSCs Chairmans directives;

   4.4.10 Providing advisory and technical services in information technology in compliance with applicable laws and regulations;

4.4.11 Accomplishing other duties as assigned by the SSC’s Chairman.

4.5 The Securities Review:

The Vietnam Securities Review has its duties and powers in compliance with the Decision No. 331/QD-UBCK by the SSCs Chairman dated December 17th, 2003 as follows:

4.5.1 Working out the long-term and annual programs and plans of information dissemination and propaganda in the field of securities and securities markets, submitting these programs and plans to the SSCs Chairman for ratification; and organizing the implementation of these;

4.5.2 Editing, publishing and distributing the Securities Review in Vietnamese and foreign languages in compliance with the Press Law, the SSCs Chairmans directives and the License of press operations granted by the Ministry of Culture and Information;

4.5.3 Collaborating with other departments and units of the SSC and other channels to provide information and propaganda of the policies mapped out by the Government, and other regulations and operations related to securities and securities markets;

4.5.4 Providing synthesis and press briefing of the contents related to securities and securities markets so as to serve the leadership of the SSC in managing and regulating the securities markets;

4.5.5 Organizing the implementation of information and propaganda activities in the following forms:

a. Building up the database for the work of information dissemination, research and management of securities and securities markets;

b. Printing publications and reports on securities and securities markets in compliance with applicable laws and regulations;

c. Collaborating with other departments and units of the SSC to organize workshops and conferences of securities and securities markets;

d. Collaborating with other departments and units of the SSC to provide specialized training and retraining in the field of press and journalism to the staff of the Securities Review and other interested participants;

e. Cooperating and exchanging with other domestic and foreign organizations and agencies to conduct information dissemination and propaganda of securities and securities markets in compliance with applicable laws and regulations and the SSCs Chairmans directives;

f. Providing information and press services in compliance with applicable laws and regulations;

4.5.6 Accomplishing other duties as assigned by the SSC’s Chairman.

5. PERFORMANCE OF THE SECURITIES MARKET UP TO DECEMBER 2004:

After more than 04 years of operation, the securities market of Vietnam has gradually stepped into its path of stability and growth. Just with only 02 in July 2000 when the Ho Chi Minh City Securities Trading Center (HOSTC) was officially inaugurated, it has now boasted of 24 listed companies with their total charter capital of VND 1,240 billion, 140 kinds of Government bonds, 02 commercial bonds of the Vietnam Bank for Investment and Development and 01 municipal bond, with their listed total value of VND 17,300 billion. Until December 2004, the State Securities Commission (SSC) has granted licenses of securities business operation to 13 securities houses, 01 fund management company, and 05 depository banks. In 2004, the first securities fund started its operations by mobilizing capital and went listed on the HOSTC. Up to June 2004, 820 trading sessions were successfully effected on the HOSTC, with the total trading value averagely reaching over VND 17 billion per session. On June 30th, 2004, VN Index mounted to 249.7 points, with an increase of 80.5 basis points (or 47.6%) as compared to early 2004. The total market capitalization at this point of time accounted for 3.4% of GDP, or more than double as compared to 2003.

On November 28th, 2003, the Government promulgated Decree No. 144/2003/ND-CP on securities and securities markets (hereinafter referred to as Decree No. 144) to replace Decree No. 48/1998/ND-CP. This legal document consisted of new regulations to create more favorable conditions for the listing of companies, the operation and management of the markets, and for better protection of legitimate rights and interests of investors. With a better-defined viewpoint of encouraging investment and capital mobilization, Decree No. 144 boasted of considerable steps forward by introducing more flexible standards and listing requirements, thus allowing enterprises to get easier access to the centralized securities markets for their capital mobilization. The scope of regulation of Decree No. 144 was more open in terms of public issuance of securities. This was a very significant change to enhance the institutional effectiveness and minimize risks exposed to investors. Moreover, Decree No. 144 also permitted diversification of types of securities funds so as to encourage more from individual and institutional investors to get involved in the securities industry.

Though at an early stage of development, Vietnam’s securities market has gradually approached international standards in its path of growth and attracted an increasingly large number of investors, both domestic and foreign. Auditing and information disclosure are two compulsory requirements for all issuing and listed organizations. International practices in good corporate governance has since been applied to all market participants in order to enhance the quality of listed securities. Presently, all listed companies have had to comply with the Model Charter issued in November 2002.

02 years after the operation of the market, having recognized the importance of foreign investors’ participation in the securities market, Vietnam’s Prime Minister decided to extend the scope of foreign investors’ share ownership of listed companies to 30% from just 20%, and not to limit their ownership of bonds. The Government also allowed foreign securities business organizations to contribute their capital to joint ventures with local partners, with maximum capital contribution of 49%. Other foreign exchange policies were adjusted to facilitate the transfer of earnings from securities investment abroad. Apart from that, both domestic and foreign individual investors were exempted from personal income tax when they invested in securities. Last but not the least, the Government invalidated the tax on repatriation of profits.

With a view to providing a mid- and long-term vision for the securities market development, on August 05th, 2003, the Prime Minister ratified and promulgated the Strategy for Development of the Securities Market up to 2010. The determination of a strategic plan of actions of each year for the SSC was of first-rank importance in building and developing the securities market in Vietnam. On the basis of this Strategy, the Minister of Finance held that the HOSTC should follow the model of a centralized securities market to be developed to a full-fledged stock exchange and linked to other markets in the region, while the Hanoi Securities Trading Center (HASTC) would be a market for trading of stocks of small- and medium-size enterprises, to become an OTC market. Parallel with preparation of material and technical facilities for the STCs, at the moment, there have been other pieces of work which need a lot of efforts to complete, such as development of financial intermediaries, expansion of investor base, and finalization of the draft law of securities and securities markets which contain a more comprehensive scope and a wider range of issues.

The facts and figures presented above are lively evidence of sustainable and encouraging growth of the securities market, though with a modest level, as this is quite a new and sophisticated financial institution for Vietnamese regulators and investors in particular and for Vietnamese economy in general - a transitional one on its right track to a market-oriented economy. However, this path is not really a bed of roses, but paved also with a lot of limitations and hindrances of all aspects, such as lack of experience in regulation and supervision of the market, incomplete and in uniform legal framework, lack of quality goods for the market, and so on. Following are some of them in greater detail:

Firstly, limitations in terms of the legal framework and institutional capacity in policy making

As with the legal framework, the biggest hindrance so far has been that the securities market is operating not under the regulation of a full and complete securities law. In Vietnam now, the field of securities and securities markets is still regulated by other relevant legislations, such as Enterprise Law, Law of Credit Organizations, Law of Insurance Business, Bankruptcy Law, etc. Worth considering is that the legal status of Decree No. 144 is lower than the said legislations and that the legal environment is by no means uniform, therefore mismatches and conflicts among these legal documents and those of securities and securities markets are inevitable. It is well known that a stable and consistent legal environment is the first and foremost important factor for ensure investors confidence. Domestic and foreign investors shall invest their money in the securities market only when they find that their investment money and expectation of profits are both protected by a transparent and equitable legal framework. Then the Securities Law would help ensure part of their hope.

Besides, the capacity of policy making and law enforcement should also be paid due attention. Subjectively speaking, the SSC and other relevant authorities have not been strongly equipped enough to exercise their regulatory and supervisory powers as well as to enforce the compliance of applicable legal documents and regulations on securities and securities markets. This is partly because the regulatory staff have not had sufficient experience and capabilities to work out and implement appropriate policies for the development of the market, and attraction and protection of investors.

Secondly, limitations in terms of market mechanisms

Regarding the mobilization of investment capital, the limitations in terms of market mechanisms have imposed a lot of considerable hindrances not only to the ensurance of safety of capital flows, but also to the market sovereignty and confidence of both domestic and foreign investors. As for a newly established market, the lack of uniform market mechanisms can be understood now as a matter of course. But the absence of self-regulatory organizations, credit rating agencies, the independent center for securities registration, depository, clearing and settlement, professional securities houses, and above all that, the low legal status of the securities regulator are all the weaknesses which make investors think that investment in the securities markets means exposure to a lot of risks. Apart from that, these weaknesses shall also pose many kinds of difficulties to investors in making their investment decisions and alleviating those risks.

Thirdly, limitations in terms of supply of securities

After more than 04 years since its inauguration, Vietnams securities market has faced with a very limited supply of securities, not to count the low quality of these products. A market with 24 listed stocks of enterprises of low capital size cannot reflect the whole picture of Vietnams economy for investors to judge its health as well as its prospect. Similarly, the total number of listed stocks is so low, so that investors cannot have a wide choice for their investment to substitute traditional bank deposits. Presently listed stocks are not of the biggest companies to convince domestic and foreign investors that their money could bring them fat profits from these stocks in the short term.

Fourthly, limitations in terms of investor base

Due to a number of economic and social factors, up to this moment, the securities market of Vietnam has not got a firm and stable investor base as have the other developed markets. The majority of them now on the market are small investors who lack both experience and knowledge of securities investment. This is caused by two aspects: first of all, the securities market itself is still in its early stage, so it cannot be developed in days or weeks. Besides, there have not been strong and key institutions which function as market-makers. Secondly, the system of legal documents of securities and securities markets is not yet full and complete and the supply of securities to the market is still limited, which hinders investors from showing their interest and actually participating in this market.

6. FURTHER STEPS TAKEN TO DEVELOP THE SECURITIES MARKETS:

Concerning the function and performance of the securities market, the Government and securities regulator are faced with a big question of how to make it an efficient channel of capital mobilization for investment and development. It is true that a securities market can exist and develop only when it becomes an efficient tool for attracting idle money and savings among the public as well as increasing foreign capital inflows. With a view to achieving the strategic goal of developing a safe and efficient securities market for mobilization of domestic and foreign capital flows for economic and social development and on the basis of subjective judgments as mentioned above, the SSC sets the following duties:

6.1. Perfecting legal documents of securities and securities markets and enhancing the SSC’s institutional capacity of policy making

A comprehensive and consistent legal environment is synonymous to a safe and efficient investment environment. Being well aware of this viewpoint, the SSC has been actively engaged in the drafting of Securities Law. As planned, this draft law would be submitted to the National Assembly (Parliament) by 2006 and expected to be ratified and promulgated for implementation by 2007. Based on the assumption that a level playing field would be created for every stakeholder, this draft law helps enterprises get easier access to mid- and long-term capital sources, minimize their risks of mobilizing funds from other sources, and provide investors with a highest level of protection of their rights and interests. Parallel to this process of preparing the legal documents of highest status, the work of enhancing the securities regulator’s institutional capacity in policy making has also been implemented. Knowledge and skills of analysis, evaluation and forecast of the market situations have been key contents of training for the regulatory and supervisory staff so that policies can be given feasibly and effectively. Another duty of the SSC’s top priority is to plan its annual, mid- and long-term plans of actions, basing on which specific steps are taken for each suitable period of market development. One of the criteria required for the process of perfecting the legal framework and enhancing the SSC’s institutional capacity in its policy making is the introduction of international standards and practices compatible with Vietnam’s specific situations and conditions.

6.2. Perfecting market mechanisms and enhancing market intermediaries’ capacity

As mentioned above, in order to ensure a stable investment environment and minimize market risks of all sorts, the such pieces of work should be carried out as consolidating and modernizing the existing market institutions, like the STCs, securities houses, fund management companies, etc. In these institutions, both the financial capacity and operation capacity of securities houses must be intensified. As with the capacity of operation, specialized knowledge and skills of the securities houses’ practitioners must meet the requirements of the fast changing and ever challenging investment environment.

Furthermore, securities funds with their considerable capacity of capital and expertise for investment must be encouraged to take part in the market so as to make investment activities of all market participants more professional and provide guidance and direction to small investors. Other ancillary institutions, such as credit rating agencies, the independent center for securities registration, depository, clearing and settlement, etc. should be established and put into operation to provide reliable and efficient service to these market participants.

As with self-regulatory organizations, such as the Securities Business Association and the Association of Financial Investors, etc. their role in the securities industry must be brought into full play in order for these market participants to exercise their self-regulation, relieve the work burden of the securities regulator in regulating and supervising the market, and most importantly to enhance the regulatory efficiency and effectiveness through the check-and-balance mechanism.

6.3. Increasing both quantity and quality of listed securities

Increasing the supply of securities is an indispensable measure as far as policies of market development are concerned. It is earlier mentioned that the majority of securities supplied to the market comes from equitized State-owned enterprises (SOEs). Therefore, the equitization process is so organic for the securities market development. At the moment, these enterprises are all in bad need of assistance and support for their restructuring, valuation and initial public offering of their stocks. The process of equitization of SOEs thus must be made easier and faster so that more quality products shall be brought to the market for investors diversification of their investments. In order to tackle part of the difficulties in the process of corporate valuation prior to equitization, the valuation of corporate assets must then be conducted by market intermediaries instead of by the councils of corporate valuation of the enterprises themselves as previously done. Professionalism of a higher level and the independent status of the market intermediaries, such as auditing firms and securities houses, would help provide a more exact price level of stocks offered to the public and reduce negative aspects in the equitization process. In accordance with the Governments Decree No. 187/2004/ND-CP dated November 16th, 2004, the offering of stocks of SOEs with their capital size of more than VND 10 billion would have to be auctioned via the STCs, helping the existing and potential investors to get easier access to participation in these auctions and thus get more involved in the corporate transformation. The linkage between equitization and listing of stocks of the equitized SOEs would help push forward the equitization process which staggered for a while recently. Another focal point worth considering is the equitization of State-owned big corporations and commercial banks and the transformation of foreign-invested joint ventures into joint-stock companies. These moves would surely enhance the quality of securities listed on the securities markets in the short term.

6.4. Developing base of both domestic and foreign individual and institutional investors

Another solution in terms of market policies is the extension of the foreign investor base and consolidation of that of domestic investors. Apart from direct policies to encourage foreign investors, such as exemption of income tax and easing of foreign exchange policy, it is necessary to increase the opportunity of getting access to corporate information by foreign investors through encouraging companies disclosure and dissemination of their financial information, issuance of their prospectuses, reports on their performance and compliance of regulations and practice of corporate governance, etc. in English on the mass media or Webster of their own, the SSC or STCs. This is really significant in the sense that on the one hand, it attracts more foreign investors attention of and interest and on the other, enterprises would gradually establish a new culture of external and public relations.

As for domestic investors, the most important thing is that they should upgrade their knowledge as well as their skills in securities investment. This can partly be done by propaganda, programs on the mass media, etc., and through training courses tailored for the public.

The establishment of securities investment funds and allowance of these funds to engage in joint ventures are another positive move taken by the regulator towards specialization of investment activities and enhancement of securities investment skills.

6.5. Developing securities markets in their relation with other sectors of the financial markets

So as for the financial markets to develop in a comprehensive, well-balanced and efficient manner, closely and harmoniously linked to other sectors of these markets, the development of the securities markets must be well in line with that of the insurance and and money markets. The insurance market is the major provider of institutional investors with most considerable financial potential for the securities markets and consequently, the securities markets create more investment instruments for the insurance companies to be able to manage and diversify their portfolio in the most efficient way. In this regard, the insurance market in Vietnam now has attracted a large amount of clients as well as their capital. By the end of 2003, revenues from insurance premiums of 05 life insurance companies reached over VND 7,000 billion, more than double the same period of the previous year. The question is how to encourage these insurance companies to take a more active role in investing in the securities markets. Legal documents of securities and securities markets now have allowed insurance companies to set up their affiliated fund management companies to manage funds obtained from insurance premiums and insurance reserves to be financially invested and these fund management companies can engage in the securities markets as institutional investors.

As a provider of major sources of medium- and long-term capital for development investment, the securities market has been developed in parallel with the money market - the provider of short-term finance through its credits and loans. These two channels of fund raising are complementary, not substitutive, so as to meet short- and long-term capital needs for the economy. The simultaneous and efficient growth of both markets shall produce short- and long-term yield curves to subjectively reflect the capital needs in the short and longer terms of the economy, helping investors to form their investment strategies and manage their portfolio of assets more efficiently. The linkage between the money market and securities market is evidenced by the bond market, in which the Government bonds play the focal role. Repo, swaps and other open market operations are solutions for the enhancement of this linkage.

Besides the solutions as mentioned above for the development of markets and mobilization of domestic and foreign capital flows, the SSC has been well aware of the inevitability and importance of integration with regional financial markets. As an ASEAN member, Vietnam’s securities markets cannot stand aside from the on-going process of integration in the region. Recently, the SSC has been actively taking part in the implementation of 11 points of capital market development in this region as mapped out in the ASEAN’s Hanoi Action Plan. In the framework of this Plan, common shared efforts should be made in order to accomplish all the commitments and workload towards increasing cross-border relations in securities and securities markets in the short term on the one hand and towards international integration of financial markets in the long term on the other.

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