Vietnam's stock regulator takes flak for oversight

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The State Securities Commission of Vietnam has attracted a lot of criticism after imposing a fine on a group of investors who bought Sacombank shares secretly in a takeover attempt.

The action was taken five months after the first purchase was made.

Analysts say the delayed response only shows that the stock market watchdog could not act promptly on trading violations and is unable to warn listed companies of possible hostile takeovers.

A total fine of VND180 million (US$8,620) was slapped on one investor and two investment companies last Friday for buying a large number of Sacombank shares as they bid to become major shareholders of the Ho Chi Minh City-based lender without informing the authority.

According to a Tuesday report in the Tuoi Tre newspaper, the two companies, both of which are linked to Eximbank, successfully raised their holdings of Sacombank to 5.17 and 5.01 percent in January and March respectively.

Meanwhile, Tran Phat Minh, a board member of the Southern Bank's securities firm, secured an ownership of 5.01 percent on February 24 by buying more than 1.5 million Sacombank shares.

The report said that even though each of the purchases was made in a single trading session and in such a large volume, the SSC did not take any action until now.

Analysts said it can be argued with justification that the authority had turned a blind eye to the second and third purchases, which took place after news reports surfaced in mid-February about Eximbank leading a group of investors and demanding a new management board at Sacombank. They also said SSC is capable of tracking every single trading account, implying that the oversight could have been intentional.

"SSC could not have been unaware of this, but it chose to remain silent," Tuoi Tre quoted an unidentified analyst as saying.

Sacombank is Vietnam's fourth-largest publicly traded lender by assets with reportedly more than 70,000 shareholders. It just went through a management shakeup late last month which saw outsiders successfully taking control of it.

Only three Sacombank officials joined the new 10-member management board. Four of the new board members came from Southern Bank and two were from Eximbank.

Sacombank Chairman Dang Van Thanh described the personnel changes as "normal".

Vu Bang, SSC Chairman, told Tuoi Tre that there was nothing "dubious" about how his agency dealt with information disclosure violations in this case. He said it usually takes a few months to impose penalties.

"I have asked SSC inspectors to report on how they handled the case of these three major shareholders, but I believe they have followed the rules," Bang said.

Dau Tu Chung Khoan (Securities Investment) newspaper said in a commentary Monday that there are many questions that remain in the case, one of which is why the regulatory authority had remained silent until the takeover was completed.

"The Sacombank takeover has raised concern among listed companies about the risk of
losing their control at any moment, when regulations for mergers
and acquisitions are not strong enough," the commentary said. "On the stock market, those with money are allowed to buy shares, but where is the law if secret buyers aiming to take over a company are only fined several tens of millions of dong?"

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