Disclosure Rule Violators to See Names Published

This is the first time the commission (SSC) has named and shamed companies for breaking the disclosure law.

Nguyen Son, head of the SSC’s Market Development Division, said the commission was formulating a new circular on information disclosure that would replace Circular 9/2010/TT-BTC. He said the new circular would pay greater attention to transparency, accuracy and efficiency.

Violations on information disclosure are rampant on both bourses. The Ha Noi Stock Exchange alone recorded 150 cases of late submission of second-quarter financial reports.

Recently, Viet Nam Fumigation Co (VFG) was fined VND80 million (US$3,840) and Beton 6 Corp (BT6) VND70 million ($3,360) for the late submission of their audited financial statements in the second quarter.

Meanwhile, numerous companies were penalised for late submission of their 2010 audited financial reports. Among those were Ben Tre Forestry and Aquaproduct Import Export (FBT), Interfood Shareholding (IFS), Sieu Thanh (ST8), Dong Nai Plastic (DNP), Da Nang Books and School Equipment (BED) and Na Loi Hydropower (NLC).

Fines for such late disclosure of reports, as well as late announcements of personnel changes and decisions by boards of directors, range from VND70 million ($3,300) to VND80 million ($3,800).

The SSC was stung into action when it discovered Vien Dong Pharmaceutical (DVD) had concealed bankruptcy information which caused heavy losses for investors. Meanwhile, the SSC suspended trading of Descon Construction Corp (DCC) shares after repeated disclosure violations.

However, market insiders say fines of up to a few hundred million dong are not severe enough to discourage firms from breaking disclosure rules.

Pham Thu Trieu, deputy head of Thang Long Securities Co’s investment banking department, said a credit rating system for businesses should be established.

Trieu said a credit rating system would force firms to be more serious about transparency. He said most bourses in developed countries used rating agencies such as Fitch, Moody’s or Standard&Poor to publish credit information on listed firms.

In Viet Nam, only the Credit Information Centre (CIC), which comes under the central bank, and the Credit Rating of Viet Nam JSC (CRV) are responsible for rating the financial health of a firm. However, at the moment, that information is limited to the issuance of an annual report on the Viet Nam index.

“Credit ratings are not mandatory under the law. But I believe, this activity will be more important, becoming an indispensible basic indicator for investors’ evaluation,” Trieu said.