MOF is collecting opinions on the draft law on amending and supplementing articles of the Law on Securities, Law on Accountancy, Law on Independence Auditing, Law on State Budget, Law on Management and Use of Public Assets, Law on Tax Management and Law on National Reserve.

In addition to legalizing securities manipulation with the regulation on restricting transactions with individual investors, in order to protect the market, the draft law on securities (amended) also requires the institutions issuing bonds to the public to have mortgaged assets, or bank guarantees when applying for permission to issue bonds (except in the case where credit institutions offer to sell bonds which are secondary debts satisfying the requirements to be eligible to be counted as tier-2 capital, and there are representatives for bonds as per regulations).

With the regulation, to be eligible for issuing corporate bonds to the public, enterprises must mortgage assets and make secured transaction registration for bonds before they submit dossiers for permission for bond issuance.

Lawyer Truong Thanh Duc, director of ANVI Law Firm, said that the tentative regulation contradicts the regulation on professional investors. Once issuers have mortgaged assets, or they have bank guarantee when issuing bonds to the public, the issuance is relatively safe with nearly no risk for buyers, so why there are still requirements on professional investors?

Regarding the inclusion of additional regulations on the requirements on securities professional investors in the draft law, Duc commented that the requirements are too strict, which will restrict the number of individual investors to join the corporate bond market.

Agreeing with Duc, Lawyer Nguyen Duc Manh from Bizlink said that the policymaker still cannot explain the provision that states investors must have at least two years of securities investment and make at least 10 transactions each quarter in the latest four quarters, and have income of at least VND1 billion each year in the latest two years to be considered as professional investors.

Recently, investors have made fewer securities trading transactions as they can see high risks in the market. As a result, they cannot satisfy the requirements and cannot be recognized as professional investors.

“The existence of such a regulation is unconvincing and unreasonable,” Manh commented.

He warned that this may harm market development, because the market lacks individual investors and buyers, and if so, enterprises will not succeed in issuing corporate bonds to mobilize capital.

Stressing that this is a risk that policy policymakers need to anticipate, he believes that there should be a reasonable roadmap to upgrade the requirements on professional investors to fit the market development.

What does the market have to have?

Regarding the requirements to issue corporate bonds to the public, the Vietnam Bond Market Association commented that the enterprises with effective business performance and good financial capability are capable of getting unsecured loans and issuing unsecured bonds to mobilize capital. The presence or absence of a guarantee is a part of bonds and is reflected in the issuance prices, and balanced by the market based on supply and demand.

Therefore, the association believes there is no need to require bond issuers to have mortgaged assets and bank guarantees, because the requirement won’t help find high-quality issuers, and it will create barriers which may result in decreases in corporate bond supply in the market.

Pham Van Hung, a respected legal expert, said the draft law tightens two things related to corporate bond issuance. In the case of private bond issuance, the draft decree prohibits individual investors from transacting private issued bonds. The draft decree also sets higher requirements on institutional investors.

In the case of bond issuance to the public, the compilation agency wants to tighten two regulations. First, the conditions for bond offering. Second, the draft law requires mortgaged assets or bank guarantee.

“When we find that a certain market poses risk for investors, we want to tighten control over the market. However, when we ‘cork’ a place, we should uncork another place, so that enterprises still can mobilize capital through another channel,” he said.

Manh Ha