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VAFI suggests cutting 70% of unnecessary licences
The Vietnam Association of Financial Investors (VAFI) has released a report about the causes of the market’s falls in the last time and lessons drawn from the prolonged falls, in which VAFI proposes cutting 70% of unnecessary licences.
VAFI pointed out that the direct reason behind the 70% fall of the stock market in the last time was the policy on tightening monetary policies. Moreover, it also cited other reasons, including repo contracts and the massive share issuance.
Especially, VAFI said that the departments belonging to the State Securities Commission only spent time on licencing, while not paying appropriate attention to policy making, administrative procedure improvement or market supervision.
VAFI stressed that SSC is the unit that releases the most types of licences among the units under the Ministry of Finance.
Regarding dividend payments in shares, according to the current regulations, listed companies that pay dividends in shares only have to submit documents to declare the payments while securities trading centres and securities depository centres fulfill the procedures. However, in fact, listed companies can only implement their plans to pay dividends in shares if they get a licence from SSC that says SSC does not oppose the companies’ plans.
“Why does SSC insist on undertaking the job of securities trading centres?” the report asks.
In the world, dividend payments in shares can be carried out with very simple procedures. Meanwhile, in Vietnam, all listed companies that pay dividends in shares have to hire securities companies which, on behalf of the listed companies, fulfill procedures for the payment.
VAFI has also raised a question about the efficiency of the licencing.
The licencing of securities firms does not ensure the good quality of securities companies, while the licencing of share issuances does not ensure the quality of commodities on the market, though SSC has 3-6 months to verify documents before licencing. Investors have been incurring losses from the bad quality of commodities, the quality of which cannot be controlled by SSC.
VAFI has called for a reconsideration of the licencing scheme and 70% cut of unnecessary licences. It said that the power should be extended to securities trading centres and other agencies, while SSC should focus on supervising the market and making policies.
VAFI has also put forward several suggestions to help develop the stock market in a more sustainable way. SSC should draw up a plan and deadline for reducing securities loans. Banks are advised to reduce their outstanding loans to fund securities investments to 10% of the chartered capital of the banks by December 30, 2008.
VNN
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