Central authorities have sent out a strong message that the securities and corporate bond markets will be made healthy and transparent. Their move came after serious infringements were detected on these markets.
The root cause
A reason for such cases that led to arrests is violations by business leaders. Why have these cases arisen? The answer is that these individuals have deliberately infringed regulations.
However, it is not the only reason.
For example, former FLC chairman Trinh Van Quyet did not announce his share sale plans in advance twice. The first time, several years ago, the number of shares was lower than that of the second time. However, the nature of the two cases is similar. If heavy sanctions were imposed on Quyet the first time, he would not have dared to repeat his market manipulation tricks.
Thus, one of the reasons for the unsafe and unhealthy development of the Vietnamese financial market is the irresponsibility of the competent agencies toward serious violations of individuals and organizations.
In addition, Do Anh Dung, chairman and general director of Tan Hoang Minh Group, has been charged with swindling to appropriate assets as he had allegedly taken advantage of FLC affiliates to conduct nine corporate bond issues to raise a total of VND10.3 trillion from investors. The money was not used for the purposes stated in the bond sale documents.
The violation was committed publicly since July 2021. However, the State Securities Commission of Vietnam just canceled the nine illegal bond issues after the Ministry of Finance told it to do so. (1)
In other words, Dung’s illegal act of using the money raised from the bond issues for purposes other than those stated in the bond sale documents must be sanctioned under the prevailing law but it was not detected and addressed until a request was made from a law enforcement agency (probably the Ministry of Public Security), and not the agencies responsible for the management and supervision of bond issues, specifically the State Securities Commission and the Ministry of Finance. This is due to either a lack of responsibility or the poor management and supervision of the competent agencies.
As analyzed above, the violations were partly due to the competent agencies’ mistakes. However, the problem has not been identified and admitted. Moreover, neither the individuals nor the agencies have been seriously handled for their irregularities.
Instead, the public has been oriented toward issues that are not related to the responsibility of the competent agencies, such as unprofessional investors, fraudster turned investors and the purchase of bonds through investment agreements. Enterprises have been under fire for issuing large volumes of bonds at high coupons, violating regulations on information disclosure and using the money from bond issues for different purposes compared with the purposes stated in the bond sale documents, while bond issuance service providers were blamed for failing to provide sufficient, transparent and accurate information (2).
Obviously, the irregularities of investors, bond issuers and bond issuance service providers have persisted. This is what the law enforcement, inspection and supervision agencies need to handle; otherwise, their existence is meaningless.
The irresponsibility of the competent agencies has paved the way for irregularities to continue occurring as they are not seriously handled. It is worrisome that the competent agencies might come up with solutions that will tighten control over the market in an unreasonable manner, not relating to the shortcomings and poor capabilities of the competent agencies.
For example, the competent agencies may tighten regulations on the purposes of issuing bonds, set stricter requirements for the financial safety and stipulate the kinds of bonds that individual investors are allowed to buy and transfer (2).
These solutions may raise the spirit of “banning if failing to control”, which will cause a heavy impact on the normal operation of the financial market.
Last but not least, although such solutions may help develop a healthy market, they will put honest enterprises and investors at a disadvantage, and not those deliberately violating regulations until the competent agencies realize their shortcomings and remove them to improve their capacity and assume responsibility in the management, supervision and prevention capacity.