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Securities watchdog needs autonomy to function well: expert
The Ho Chi Minh City stock market’s 47 percent crash this year, which put it among the worst global performers, has placed the State Securities Commission (SSC), the stock market regulator, in the limelight.
Bui Kien Thanh, former resident senior advisor in Vietnam to the US insurer American International Group, spoke to a local newspaper about the SSC’s functioning.
Reporter: Why does the SSC seem reactive rather than proactive?
Bui Kien Thanh: The SSC is under the Ministry of Finance. Therefore it can’t operate independently, having to seek approval for its policies.
Foreign market regulators rely on securities laws to make decisions. But the SSC has to submit policy proposals to many higher levels.
Some say the SSC should be under the Ministry of Finance because the Vietnamese stock market is small. What is your opinion?
No matter how big the market is, the SSC should have enough power to do its job.
But it has been said the ministry is running the SSC well.
The ministry has hundreds of other tasks on its hands. People wonder how good the ministry’s expertise in stocks is that it can make judgment on the SSC’s policies. How many people at the ministry can analyze stocks? Without having stock experts to analyze the market, the ministry struggles to make appropriate decisions.
The SSC is the unit following the stock market closest, but it has to seek approval for its policies from the Ministry of Finance, whose understanding of the marketplace is less than the SSC’s.
This “remote management” has two effects: either the ministry will rely on the SSC’s recommendations to make decisions, which will then be late, or the ministry will reject the SSC’s suggestion and rely on its limited knowledge of stocks to make decisions, which could easily hurt the market.
So will there be more uncertainties on the stock market in the future?
All the SSC has to do when the market tumbles is to make recommendations to higher agencies. [Issues that can rescue the market] like raising foreign ownership in banks and allowing investors to buy stocks using foreign currencies can only be decidedly the central bank and government. Flotations by 1,500 state-owned companies worth around US$1 trillion in the next few years will see the market struggle to remain positive. But delaying these firms’ initial public offerings (IPOs) is not within the SSC’s powers.
What aspects of the SSC’s functioning would you like to see improved?
It is hard to say what model is appropriate for the SSC. However the US Securities and Exchange Commission, which operates independently, is a good model.
In Vietnam, units operating independently are not a familiar sight but the SSC should develop as an independent unit. The most important thing to decide a unit’s survival is its effectiveness.
The Vietnamese stock market will have to cope with many problems in the near future. Foreign investment in the market is only around US$4 billion but investors are always jittery when foreigners sell heavily.
We need an agency that can implement measures to stabilize the market and cope with all kinds of problems.
Thanhnien
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