HANOI: More than 30 brokerage firms, about 30 per cent of all brokerage firms, will be suspended if they record combined losses equal to half of the capital or their equity is lower than the legal capital required to operate their businesses.
Those conditions are included in the draft of an amended decree on how brokerage firms are founded and operated. The State Securities Commission has been collecting feedback from market analysts and companies to finalise the law.
According to the securities law, a brokerage company must have at least VND50 billion (US$2.2 million) in its charter capital, and have capital of between VND10 billion ($444,000) and VND165 billion ($7.3 million) to perform each of following business activities such as consultancy, brokerage, share trading or issuing a guarantee for stock issuance.
The new drafted decree has raised different ideas about how it will affect the market and how small brokerage firms with low performances can maintain their business.
The brokerage sector would get smaller and small-sized brokerage firms, who record low performances and did unfair actions to win market shares and customers, could be removed, Truong Hien Phuong, Director of Kis Viet Nam Securities Corporation’s HCM City Branch, told local media.
Therefore, big companies would likely acquire and merge with the small ones to expand their businesses and market shares, Pham Minh Tuan, SaigonBank Berjaya (SBB) Securities JSC said. He said that mergers and acquisitions (M&A) would help reduce the number of brokerage firms and strengthen the brokerage sector.
However, the drafted decree will likely have little impact on the brokerage sector as the big firms have already acquired a large part of the market, Nguyen Xuan Binh, Deputy Head of Bao Viet Securities Corporation’s Market Analysis told Viet Nam News.
He said that small-sized brokerage firms with weak performances will be shut down and they could hardly attract external investors in order to raise capital and business performances as they have little impact on the market.
Big companies would consider acquiring and merging with medium-sized firms, which occupied 40 per cent to 60 per cent of the number of brokerage firms on the market, to expand their businesses and improve their performances, Binh added.
