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Brokers seek delay to new capital rules
Stock brokerages are calling for more time to comply with a regulation requiring them to increase their charter capital.
The Vietnam Association of Securities Businesses (VASB) wrote to the Ministry of Finance and the State Securities Commission last week seeking a delay in the deadline for securities companies to make the compulsory increase in equity to June 30 of next year.
The association said a postponement would help ease disadvantages for securities companies, especially at a time when the stock market was in a prolonged downturn and the economy was facing difficulties.
Government Decree No. 14, issued on January 19, 2007 to further implementation of the Law on Securities, set minimum registered capital levels for securities firms, effective December 31 of this year. The capital requirements were set in relation to the level of services the firms offer. A firm that only offers investment consulting would be required to have a capital of 10 billion VND (606,000 USD) or more, while a brokerage would require minimum capital of 25 billion VND.
A securities company representing institutional investors would be required to have a much higher registered capital of 100 billion VND or more, while firms which underwrite securities would be required to have capital of 165 billion VND.
Meanwhile, a firm which offers a combination of these services would have to have separately met each of these capital requirements. In other words, the requirements could not be met cumulatively, and a firm that is both a broker and which engages in trading on behalf of institutional investors would have to have a minimum capital of 125 billion VND.
In a meeting with securities company representatives last week, the State Securities Commission reaffirmed that the companies were expected to comply with the December 31 deadline.
The securities company with the least equity currently has only 9 billion VND in capital, the commission announced on its website last week.
VASB figured that there were now 35 securities companies that had not yet met the capital requirements, and these firms needed an additional 7 trillion VND (424.2 million USD) by the end of the month in order to meet the deadline.
“We will have to meet with our shareholders to discuss plans,” said the chairman of one securities company, who requested to remain anonymous. “Many shareholders don’t want to contribute more money now.”
Some firms may want to cut services which they have registered to offer, rather than comply, he said, suggesting that firms that cut securities underwriting services would not significantly affect their businesses in the current context.
“But firms involved in institutional trading are on the horns of a dilemma,” he said. “It’s not easy to cut this service.”
The question remained whether such firms could divest themselves of institutional investor accounts prior to December 31 or would be allowed to phase them out past that deadline, the chairman said.
Cutting registered services or reducing registered capital was no easy matter, in any case, said the director of another securities firm, who also requested anomymity.
VNA
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