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New code of conduct for brokers, securities firms

 A new code of conduct will be introduced in 2020 to improve the ethical standards of brokerage firms and brokers, according to the Vietnam Association of Securities Businesses (VASB).

The need for a new code comes from the fact that some foreign-invested securities firms have tried to offer free trading fees for investors and pay high salaries to attract high-quality employees, causing unfair competition in the market.

Securities firms are concerned that without a new code, companies with strong support from big financial institutions will cause some instability in the securities market.

If foreign-invested firms are able to keep their trading fees at zero percent, local brokerages will have to cut their rates. Therefore, they worried their main income from the collection of trading fees will be hampered.

Some companies with zero percent trading fees include KB Securities Co, Yuanta Securities Co and KIS Securities Co.

Under Circular 128/2018/TT-BTC issued by the Ministry of Finance on December 27, 2018, the maximum trading fee for share and fund certificate transactions is only 0.5 percent of the value of the deal.

According to VASB members, the rate of 0.5 percent proves the connection between securities companies and policymakers is weak as the former are not always asked for feedback when a regulatory document is written.

VASB vice chairman and general director of MB Securities Co Tran Hai Ha said at the VASB’s recent year-end meeting that securities companies must have better linkage with each other and the VASB must be the bond between companies and market regulators.

Zero percent trading fees will only benefit the Vietnamese market in the short term as they may attract a higher number of retail, or individual, investors, he said. But in the long term, the market sustainability will be affected.

A policy will work more properly if securities firms are consulted when it is developed, Ha said.

After two rough years in 2018-19, there may be more opportunities for the Vietnamese market in 2020, and securities firms must work closely with the State Securities Commission and other market regulators to develop new rules and standards for the market, especially when the new Law on Securities has been approved by the National Assembly, Ha said.

Among the new rules, VASB expects its members to discuss the possibility of the new code of conduct to improve professional standards for firms and individual brokers and deliver clear punishments for violations, thus protecting investors and ensuring the transparency of the market.

According to VASB general secretary Nguyen Thanh Ky, a code of conduct was released 13 years ago, but stakeholders have paid little attention to it. A code of conduct helps minimise risks in the securities sector.

Hoang Hai Anh, vice chairman of the board of directors at PetroVietnam Securities Inc, said that all trainees must qualify for the standards of conduct and behaviour if they want to become brokers.

This is common in other economies with much more developed securities markets, Anh said, adding that VASB will compile required documents and curricula for the training.

VASB will also develop a database that tracks the performance of brokers regarding their professional and ethical features, which will help securities firms in recruitment, she said.

In addition, VASB and SSC will work together to check securities companies on how they comply with the code of conduct if it is approved, she said.