The policymakers should think thoroughly about giving bondissuers the right to decide whether the buyer is professional or not, Nguyen Kim Long, legal and internalsupervisory director at SSI Securities Corporation, told a seminar this week.
“The bond issuer can only evaluate its buyers on the primarybond market. When transactions are done on the secondary market, they will needa third-party body, such as a brokerage, to assess the buyers,” Long said.
“At this stage (secondary market trading), the bond issuer isno longer capable of assessing the buyers to support them with the deal.”
“Therefore, securities companies and fund managers must bethe one to do the job,” he said.
In case the bondholder is no longer professional, he or shemay be allowed to keep the bonds and sell them, but he/she is not legible tobuy more, Long added.
A bondholder can become unprofessional when his/her licenceis revoked, or the value of his/her portfolio is less than 2 billion VND (nearly 86,000 USD), or the bond issuer cuts itscharter capital to below 100 billion VND, he said.
Sharing the same opinion, Le Thi Hong Thai of VinaCapital Fund Management said itis unreasonable that only brokerage firms are given the key to consider abondholder professional or not.
“Many investors with highly-worthy portfolios are contractedto fund management firms,” so she suggested the law include fund managers amongthe units that can assess investors.
Under the amended Law on Securities, unprofessional investorswho are not certificated by financial firms and regulators are illegible to buycorporate bonds on both primary and secondary markets starting January 1. Theyare recommended to invest in the corporate bond market through financial firmsor agents.
The Ministry of Finance has recently warned buying incorporate bonds would be highly risky for unprofessional investors, most ofwhom do not understand the financial status and the performance of the bondissuers.
But according to securities firms, individual demand ofcorporate bonds is increasing rapidly as issuers offer higher interest ratescompared to banks’ savings.
As lending for some sectors would be tightened soon, localfirms are expected to explore the idle money held by the people. But thereshould be a way to help protect the investors and benefit the issuers as well.
Under the new law, the bond issuer will select the agent forthe bondholder and the agent will manage the portfolio for his client.
But if the bondholder wants to have someone represent andmanage his corporate bonds, he should be able to change the agent, Long of SSISecurities said.
In the case of the issuer declaring bankruptcy, it would bedifficult for the agent to settle the collateral and the relationship betweenthe agent and the bondholder must be tied by the Civil Law, he said.
There should be regulations and contracts between bondholdersand agents, which are normally brokerage firms, to allow the agents to settlethe collateral, BuiThanh Tuan ofMaybank Kim Eng said.
The creditability of bond issuers should also be rated butthe term should be six months instead of 12 months as suggested, he said,adding long term credit rating and settlement would cause damage to investors’investment.
Director of SSC’s Securities Public Offering ManagementDepartment Bui Hoang Hai said that at the moment, there is norule to rate the creditability of corporate bond issuers.
Only those that plan to sell bonds with values exceedingtheir total assets are assessed before the issuances are carried out, he said.
The feedback collectedat the seminar will be reported to and discussed in the group of writersand changes could be made quickly to serve the amended Law on Securities, Hai said.
The seminar was co-chaired by the State Securities Commission(SSC), the Vietnam Association of Securities Businesses (VASB), and the VietnamChamber of Commerce and Industry (VCCI) to discuss a draft decree instructingthe implementation of the amended Law on Securities, which was approved by theNational Assembly deputies in November 2019 and will come into effect on January1, 2021./.