Changes in the OTC market

There will be a lot of changes relating to several hundreds share items being transacted on the OTC (over the counter) market, when public companies have to follow the regulations on registration, information exposure and securities deposit as required by the Securities Law.


According to the Securities Law, there are three groups of public companies, including the companies that 1. have offered shares to the public 2. have listed on the bourse and 3. have at least 100 shareholders, not including the professional financial institutions, and have the contributed chartered capital of VND 10bil (0.62mio US$) at least.

The companies belonging to the third group must register to the competent authorities within 90 days since the day of becoming public companies. With this regulation, nearly all enterprises and banks, that have shares traded on the OTC market, are public companies. The Ministry of Finance has hurried public securities to register in March.

Public companies must expose periodic and unscheduled information as required by the Securities Law, and must seek permissions when issuing shares, deposit securities at depository centres, and follow the principles on companies’ governance stipulated by the Enterprise Law and circulars by the Ministry of Finance.

The shareholders, who hold more than 5% of shares, must report when they make the transactions that can change the share ownership in public companies by 1%. Public companies will be punished if they violate the regulations of the Securities Law.

Once the shares are deposited at the depository centre, the transfer of shares to be carried out by the companies or agents (securities companies) would be considered unlawful. The shares will only be transferred after they are deposited, and the ownership of the buyers will only be recognised by depository centre.


The requirement on depositing shares would lead to the big change in the OTC market. From now on, the transactions of OTC shares would be simpler and quicker. OTC shares will also have codes and be transacted through the accounts opened at securities companies like listing shares.
It is expected that securities companies will pay more attention to providing services relating to OTC shares, while freelance brokers will have no job to do. Making transactions through the depository centre will also help successfully control the transactions of shareholders, which will serve the taxation in the future. It is estimated that before the law on PIT (personal income tax) comes into effect in 2009, there will be a big wave of share assignment to avoid tax.
Analysts said that public companies all will list on the bourse, as the responsibilities they must fulfil are similar to the responsibilities of listing companies.

Source: VEN