Vietnam's securities market is as modern as most western markets. The framework governs public offerings, trading, and market operations. This article will cover the structures and regulations that shape Vietnam's markets.

Key Regulatory Bodies

State Securities Commission (SSC)

State Securities Commission, operating under the oversight of the Ministry of Finance. The SSC functions as the primary securities regulator with wide-ranging responsibilities that include licensing securities businesses, approving public offerings and takeovers, overseeing market operations and participants, and investigating and enforcing securities law violations. This is akin to the United States of America's SEC with much broader execution powers.

Vietnam Securities Depository (VSD)

Vietnam Securities Depository is the country's sole central securities depository. As a state-owned company, the VSD performs market infrastructure functions including registering and depositing publicly issued securities, clearing and settling transactions from the stock exchanges and UPCoM, and acting as a transfer agent while handling corporate actions for issuers. More on UPCoM later.

State Capital Investment Corporation (SCIC)

The State Capital Investment Corporation is Vietnam's sovereign wealth manager, tasked with managing state capital in equitized state-owned enterprises. When state-owned enterprises transform into shareholding companies through the equitization process, SCIC holds and manages the state's ownership stake, making it a significant institutional player in the market.

Stock Exchanges and Trading Venues

Vietnam operates two primary stock exchanges that serve different market segments and apply varying listing criteria. There is a third lesser known sub-exchange which is considered the training wheels for any company wishing to go public.

Ho Chi Minh City Stock Exchange (HOSE)

HOSE represents the larger and more liquid of Vietnam's two exchanges, applying more stringent listing conditions. Beyond equity trading, HOSE provides the official mechanism for new government bond issuances and serves as the secondary market for existing government bond trading. This is also a market typically found on foreign brokers as tradeable equities. The other types are rarely, if ever available for purchase outside of having a Vietnamese brokerage account.

Hanoi Stock Exchange (HNX)

HNX operates with generally lower listing requirements than HOSE, making it more accessible to smaller companies. Despite being the smaller exchange, HNX plays a crucial role in Vietnam's capital market development.

Unlisted Public Companies Market (UPCoM)

The UPCoM, established and managed by HNX under SSC-approved rules, provides a regulated over-the-counter market for unlisted public companies. Admission to UPCoM is mandatory by default for all public companies, though enforcement of this requirement has been inconsistent. Trading on UPCoM offers the advantages of a centralized and transparent platform while applying modified trading rules, including wider price bands than the main exchanges to accommodate the more illiquid nature of these securities.

Understanding Public Companies

In Vietnam, a company qualifies as public if it meets any of these criteria:

• Has issued shares through a public offering
• Has shares listed on a stock exchange
• Has more than 100 non-institutional shareholders with paid-up charter capital of at least 10 billion Vietnamese dong

Public company status triggers enhanced regulatory obligations, including filing and disclosure requirements that ensure market transparency and investor protection.

Public Offerings and Listing Process

Vietnam distinguishes between public offerings and listings, though companies may pursue both simultaneously. A public offering involves selling shares, bonds, or fund certificates either through mass media or to at least 100 non-institutional investors. This process requires SSC approval and must be conducted through a registered prospectus, with all securities denominated in Vietnamese dong.

Listing represents a separate process of making a company's securities available for public trading on a stock exchange. Companies must first complete an approved public offering before applying for listing. Each exchange maintains distinct listing criteria covering minimum capital requirements, profitability track records, minimum public shareholding spreads, and management lock-up commitments.

Securities Businesses and Licensing

Vietnam's regulatory framework establishes licensing requirements for various securities market participants:

Securities Companies

These entities engage in securities brokerage, proprietary trading, underwriting, and investment consultancy services.

Funds Management Companies

Specialized firms that manage investment funds and client portfolios under strict regulatory oversight.

Securities Investment Companies

Essentially incorporated funds that invest in securities, including holding shares in Vietnamese companies.

All securities businesses must meet stringent licensing requirements encompassing minimum legal capital, infrastructure specifications such as computer systems, and staff qualification standards.

Investment Funds Sector

Vietnam's fund industry comprises two main categories:

Public Funds

These funds, which may be open or closed-end, must comply with extensive regulations covering investor numbers, minimum subscriptions, and investment restrictions. Their operations face strict regulatory oversight to protect investor interests.

Members' Funds

Subject to lighter regulatory requirements, members' funds operate primarily under their charter agreements. They require fewer investors and simpler management structures, making them more flexible investment vehicles for sophisticated investors.

Disclosure and Transparency Requirements

Market disclosure obligations apply broadly across public companies, bond issuers, securities businesses, major shareholders (those holding 5% or more of voting shares), and stock exchanges. Companies must provide both periodic disclosures, including annual audited financial statements, and extraordinary disclosures for material events. The overriding principle requires timely disclosure of any information that could impact securities prices.

Market Integrity and Insider Trading

Vietnamese securities law strictly prohibits insider trading, defined as using non-public information that could materially impact securities prices for personal gain or to benefit third parties. Violations carry severe penalties, including criminal sanctions of up to seven years imprisonment for individuals and fines up to 10 billion VND for companies, depending on the illegal profits earned or losses avoided.

Foreign Investment Framework

Foreign investors can participate in Vietnam's securities market through a structured process requiring:

• A securities trading code from the VSD
• An indirect investment capital account in Vietnamese dong at an authorized bank
• A securities custodian account

Historically, foreign ownership in public companies was capped at 49%. However, since September 2015, public companies may increase foreign ownership up to 100% with SSC approval, unless they operate in sectors with specific foreign ownership restrictions or conditional investment areas.

Trading Rules and Market Mechanisms

Both main exchanges implement trading rules designed to maintain market stability, including price bands that limit daily price fluctuations. These bands vary between exchanges and are widest on UPCoM to accommodate lower liquidity. All trades must be conducted through authorized methods, either order-matching or put-through transactions.

That's about it for the main aspects of the Vietnamese securities markets. This crash course obviously doesn't cover getting listed and the necessary steps for getting approval through SSC. If you have question with regards to this, either email us or visit flx.city.