On November 29, 2024, the National Assembly issued Law No. 56/2024/QH15, which amends and supplements several provisions of various laws ("Law No. 56"), including several notable changes related to the Securities Law. Compared to the draft previously mentioned by ATA in its special report on September 26, 2024, Law No. 56 includes many adjustments aimed at removing provisions that ATA had previously assessed as not entirely suitable and/or feasible. In this article, ATA Legal Services will focus on analyzing the new points of the amended Securities Law as follows:
1. Addition of more acts considered as market manipulation:
The amended Securities Law introduces a detailed definition of acts considered as "market manipulation" for the first time. Accordingly, market manipulation is defined to include the following actions:
- Using one or more of one's own or another person's trading accounts, or conspiring to continuously buy and sell securities to create artificial supply and demand;
- Placing buy and sell orders for the same type of securities on the same trading day or conspiring with others to engage in buy and sell transactions that do not result in the actual transfer of ownership or where the ownership only circulates among members of a group, with the aim of creating a security price or artificial supply and demand;
- Continuously buy or sell securities with dominating volume at market opening or closing times to manipulate the securities price;
- Transacting securities through collusion, enticing others to continuously place securities buy and sell orders, significantly effecting on supply and denamd, and securities price, manipulating securities price;
- Directly or indirectly expressing opinions through mass media about a type of securities or securities issuer, intending to influence the price of that security after having conducted transactions and holding a position in that security;
- Using other methods or engaging in different trading activities, or combining the spread of false rumors and providing misleading information to the public to create artificial supply and demand and manipulate security prices.
Compared to the previous provisions of the 2019 Securities Law, Law No. 56 has added several new acts, including: (i) Placing buy and sell orders for the same type of securities on the same trading day or conspiring with others to engage in buy and sell transactions that do not result in the actual transfer of ownership or where the ownership only circulates among members of a group, with the aim of creating a security price or artificial supply and demand; (ii) Continuously buy or sell securities with dominating volume at market opening or closing times to manipulate the securities price; (iii) Directly or indirectly expressing opinions through mass media about a type of securities or securities issuer, intending to influence the price of that security after having conducted transactions and holding a position in that security.
In ATA Legal Services opinion, these provisions were added and legalized based on recent cases and violations. This not only helps reduce fraudulent activities but also enhances the protection of investors' rights. It is a significant step forward compared to the old law, where regulations on market manipulation were quite vague and lacked deterrence. Strengthening this legal framework creates favorable conditions for the market to develop in a more transparent and sustainable manner.
2. Addition of conditions to become a public company:
The amended Securities Law has introduced additional conditions for a enterprise to become a public company. Specificially, a public company is a joint stock company that falls into one of the following case:
- The company has a contributed charter capital of at least 30 billions, an equity capital of at least 30 billions, and at least 10% of the voting shares held by at least 100 investors who are not major shareholders;
- The company has successfully offered shares to the public for the first time through registration with the State Securities Commission according to the regulations.
Thus, it is clear that Law No. 56 has added a requirement for equity capital to be at least 30 billion VND for joint-stock companies to be considered public companies under the first scenario. This regulation also delves deeper into the capacity of public companies, indirectly tightening the conditions for entities participating in securities transactions and activities.
Moreover, the notable amendments have also introduced additional cases where a public company may lose its public company status compared to the previous regulations. Specifically, in addition to losing the status for not meeting one of the conditions for being a public company, Law No. 56 adds the following cases:
- Failing to disclose information for 2 consecutive years regarding audited annual financial reports;
- Failing to disclose information for 2 consecutive years regarding the resolutions of the annual general shareholders' meetings;
- Within 1 year from the date the State Securities Commission confirms the completion of the public company registration or from the date the public offering ends, the company does not register its shares with the Vietnam Securities Depository and Clearing Corporation or does not register for listing or trading of its shares on the stock exchange.
A key point in this new regulation is that these cases of revocation are enforced immediately without a waiting period of one year, as was the case for failure to meet the conditions of being a public company under the old provisions. This is a completely new regulation and a significant reform in Vietnam's securities law, contributing to increasing transparency, minimizing fraudulent activities, and enhancing the responsibility of public companies in disclosing information and fulfilling other obligations as prescribed.
Furthermore, Law No. 56 also grants the State Securities Commission the authority to revoke the public company status based on the shareholder list provided by the Vietnam Securities Depository and Clearing Corporation or the latest audited annual financial report of the company, without needing notification from the company. This regulation has also "ease the difficulties" for current public companies, as many cases could not be revoked due to the lack of cooperation from shareholders and/or companies failing to comply with regulations, thus affecting the interests of investors.
3. Foreign individuals and foreign organizations engaging in investment activities in Vietnam recognized as professional securities investors:
Law No. 56 has added foreign individuals and foreign organizations conducting business investment activities in Vietnam to the category of professional securities investors. This is a new provision compared to the previous regulations under the 2019 Securities Law. This change helps elevate the status of Vietnam's securities market internationally and provides more favorable conditions for foreign securities investors considering investment in Vietnam.
4. Narrowing the Scope for Individual Professional Securities Investors to Participate in Private Corporate Bond Transactions:
Rather than increasing the criteria for being classified as a professional investor, Law No. 56 has added provisions that narrow the scope of individual professional securities investors' participation in private corporate bond transactions. Specifically, individual professional securities investors are only allowed to trade or purchase private corporate bonds in the following cases:
(i) Bonds with a credit rating and secured assets backing the bonds;
(ii) Bonds with a credit rating and a payment guarantee from a credit institution.
This adjustment aims to protect individual investors—who are generally considered smaller in scale and less financially capable than institutional investors—from unforeseen risks. It also ensures that the market operates more healthily and efficiently.
5. Addition of post-approval control mechanism for private securities offerings:
Accordingly, after approving the registration of a private securities offering, the State Securities Commission will have the authority to: (i) Suspend the private securities offering for up to 60 days if it discovers:
- The registration documents for the private securities offering contain false or missing information that could affect investment decisions and cause harm to investors;
- The securities distribution does not comply with legal regulations.
The issuer must recall the securities already issued if requested by investors and refund the money to investors within 15 days from the date the request is received.
(ii) Cancel the private securities offering if:
- The suspension period has expired and the issuer has not remedied the deficiencies;
- After the conclusion of the private offering of shares, the shares are not listed or registered for trading, and it is discovered that the offering violated securities laws;
- After the conclusion of a private offering of bonds, it is discovered that the offering violated securities laws.
The issuer must recall the securities already issued and refund the money to investors within 15 days from the date the offering is canceled. After this period, the issuer must compensate the investors for any damages in accordance with the terms agreed upon with the investors.
However, in cases where, after the private offering, the shares or shares converted from convertible bonds or shares purchased from warrants are listed or registered for trading, the offering will not be canceled.
6. Enhancing the Responsibility of Organizations and Individuals Regarding Reporting Activities Related to Securities and the Securities Market:
Law No. 56 clearly stipulates that organizations and individuals involved in the process of preparing and reporting documents, as well as those responsible for verifying such documents, must be held accountable before the law for the accuracy and legality of the reports within the scope of their rights and obligations, in compliance with legal regulations. This ensures the transparency, accuracy, and integrity of the reports.
The amended Securities Law also clearly outlines the responsibilities of the competent authorities receiving, processing, and approving the reports, as well as the roles of advisory organizations, professionals involved in document advising, auditing organizations, and auditors in controlling the contents of reports related to securities activities and the securities market.
To enhance the reporting obligations of organizations and individuals, and ensure better control by the relevant authorities in the securities market, the amended regulation also requires that when a joint-stock company submits its registration for an initial public offering (IPO), it must include an audited report on the charter capital that has been contributed up until the time of the IPO registration, audited by an independent auditing firm.
7. Addition of Conditions for Public Bond Offerings and Registration Documents:
Regarding the conditions for public bond offerings, compared to the 2019 Securities Law, the amendments now, in addition to the credit rating requirements, include additional conditions such as the bondholder representative, debt ratio, and the issuance value relative to equity capital. Specifically, when submitting the registration documents for a public bond offering, the issuer is required to include a contract between the issuer and the bondholder representative.
8. Companies repurchasing shares from employees are not required to register capital reduction and enable to resell immediately:
Under the previous provisions of the 2019 Securities Law, when a company repurchased shares from employees, it was required to register a capital reduction corresponding to the total value based on the par value of the repurchased shares within 10 days from the date of reporting to the Annual General Meeting of Shareholders. However, the recent amendments clarify and permit that when a company repurchases shares from employees, it is no longer required to register a capital reduction. The company will also be allowed to resell the repurchased shares from departing employees to other employees immediately, without having to wait the usual six-month period required for regular share issuance.
The amended regulations related to securities activities in Law No. 56/2024/QH15 will come into effect on January 1, 2025. However, the provisions regarding professional securities investors participating in the purchase, trading, and transfer of private corporate bonds, as well as the conditions regarding the equity capital of public companies, will come into effect on January 1, 2026.
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