Investor Relations: Full disclosure 
Vietnam Financial Review - 08/09/2010 11:45:22 SA -
Investors are entitled to receive clear and complete information on the financial status of the companies in which they invest, but often they are left in the dark.
A 2009 report released by the Hanoi Stock Exchange (HNX) disclosed that it has reviewed 484 transactions made by 280 major share-holders and found 38 transgressions in regard to information dissemination, 155 in regard to information dissemination during internal transactions, and 13 in regard to the transaction of fund certifi- cates.
As at July 28, 2010, the Ho Chi Minh City Stock Exchange (HoSE) had received letters from 13 listed companies delaying the submission of second quarter, 2010 financial reports, including KBC, FBT, MPC, HT1, ASM, and VFC. Some of these also submitted their 2009 financial reports late.
The State Securities Commission (SSC) issued a decision on August 2 meting out punishment to three public companies due to transgressions in regard to trans- actions in the stock market, issuing fines totaling VND75 million. The three were the Lilama No. 18 Joint Stock Company, the Da Nang Transportation and Construction Joint Stock Company, and the A Vuong Hydropower Joint Stock Company. All had sold additional shares to increase capital without proper information dissemination and delayed in listing information.
On August 4, Petroland issued individual shares without prior notice and were fined VND35 million. Nari Hamico Mineral Joint Stock Company decided to issue 3.5 million individual shares with maturity up to 2012 but 80 percent of them will expire on January 4, 2011, just five months after issuing. This sparked controversy and the company then had no choice but to cancel its plans. According to company leaders, they are inexperienced in such matters.
Incorrect and insufficient dissemi- nation of information by a company in regard to its financial status damage the interests and benefits of investors. Minority shareholders often face information delays, and declining share prices. The primary objective of any business should be to maximize value for shareholders, but in reality this may not always be the case.
Latent risks
There are only a few businesses that have a complete understanding on the importance of information transparency, which aims to serve the interests of shareholders.
With 600 listed businesses on both the Hanoi and Ho Chi Minh City exchanges, it is not easy for an investor to find the information he or she may need to assist an investment decision. And the Vietnam Association of Financial Investors is incapable of managing and protecting all parties.
It seems that Vietnamese businesses are not fully aware of the importance of establishing and maintaining relations with investors. Investors should not only be treated as those who buy shares in the company but also be given the opportunity to share their opinions and views with company leaders.
Good preparation
Looking at other stock markets in the region, supervisory regulations on information dissemination on China’s stock market are strictly observed. A supervisory committee is responsible for checking all information released by listed businesses. The issuance of full and short reports on company performance is carried out via the media and the internet. Businesses are requested to release information in regard to their performance on a regular basis or when requested. When a business fails to comply, the supervisory committee determines a suitable punishment, ranging from a warning through to a fine and, finally, withdrawal of their shares from the stock market.
Relationships between businesses and shareholders should be established and maintained for the long term. Investors are now wiser. They will move their money to businesses that take care of their rights. Businesses should make their information transparent so as to help investors make the right decisions. The SSC also should improve the legal framework to oblige businesses to disseminate information and submit reports as per the regulations.
According to a draft decree replacing Decree No. 36/2007/ND-CP with regards to the application of penalties for trans- gressions in the stock market, fines will be increased to VND500 million from VND300 million, with fines of VND30- 50 million for any fraud in regard to information dissemination. Businesses were also recently requested by the SSC to disclose their investment portfolio, which helps to improve transparency.
It is important to understand that the relationship between businesses and shareholders is built from the attitude and willingness of business leaders. Only when information is clear and complete can investors have confidence, which plays an important role in business growth.
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