Investor Protection and Warning Stocks

According to the current statistics of the Securities Depository Center, by the end of August 2018, Vietnam has more than 2.1 million securities accounts, which is just over 2% of the population. compared to the total population of about 95 - 96 million people. Especially, the current monthly account over the past few years, the number of new accounts has increased by about 15 - 20 thousand accounts / month. Thus, the number of new investors entering the market is quite large.


In the photo: Statistics of the number of accounts opened across Vietnam at the end of each month in 2018. Source: Vietnam Securities Depository (VSD) (Original link in photo)

However, new investors entering the market, due to the lack of knowledge and experience in the market, they cannot perceive what is called a good stock, a transparent stock, so it is easy to fall into the "non-standard". While this is a new cash flow to develop the Stock Market in the future. In order to ensure that the Market is stable, the Legislators have devised the need to have criteria to filter out these "non-standard" stocks to warn Investors before considering Investing in Stocks. that vote. Thus, in choosing Stocks, it is best not to get involved in this crowd.

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Classification Group Stocks under Warning, Controlled, Suspended, ...

Currently, based on the severity of the violation to warn investors, the Securities Commission divides this group into 6 categories:

– Stocks subject to a Market-wide Violation Reminder

– Stocks on Warning

– Controlled Stocks

– Special Controlled Stocks (Only available on HOSE, HNX does not have this type)

– Stocks Suspended from Trading

– Shares are forced to be delisted

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The reason for the violation is classified in the Group of Stocks under Warning, Controlled, Suspended Trading, etc.

– Violation of Information Disclosure on many occasions: Late submission of Financial Statements, Late submission of Annual Report, Late submission of Resolutions of the General Meeting of Shareholders, ... . This is a fairly common mistake and is often prompted with a penalty. Transparency is one of the most important criteria of the Stock Market. You can see more articles: Disclosure of Public and Listed Companies (Part 1) / (Part 2) for more State Regulations on Disclosure before discussing about Violations, Acquired Warnings of Listed Companies.


In the photo: Sanctions of administrative violations by the State Securities Commission of An Truong An Joint Stock Company (Stock code: ATG) due to delay in Information Disclosure (Original link of photo)

According to current regulations, 3 Violations of Information Disclosure (Disclosure) in 1 year will be classified into Group: Stocks subject to a Notice of Violation in the whole Market. If 4 Disclosure Violations in 1 year are classified in a higher category: Warning Stocks. Particularly, if the submission of the Annual Audited Financial Statements or the Semi-Annual Review is more than 15 days late, it will also be classified into the Group: Warned Stocks (It is not necessary to count all 4 Violations). If further violations continue, they will be classified into the next group: Controlled Stocks (For HNX/UPCoM) or Specially Controlled Stocks (For HOSE); Stocks Suspended from Trading; Shares subject to Mandatory Delisting.

– Actual contributed charter capital falls below the minimum regulated level of the exchange: 120 billion dong for HOSE, 30 billion dong for HNX, 10 billion dong for UPCoM. The basis for calculating the breach is based on the Annual Audited Financial Statements or the Semi-Annual Reviewed Financial Statements. If on the most recent financial statement, it will be classified as: Warning shares. If in the Financial Statements of the next period (6 months) the violation continues and has not been remedied, it will be classified into a higher group: Controlled shares. And the next accounting period the Financial Statements (i.e., after 1 year of being classified as Warning Stocks) that continue to violate and have not been remedied, will be classified in the Last Group: Mandatory Delisting.


In the photo: HOSE's announcement about putting AAM stock in the Warning Stock category. Reason: Actual contributed charter capital decreased to less than 120 billion VND (Original image link)

In the picture above, Mekong Seafood Joint Stock Company – Stock Code: AAM has been classified as a Warning Stock by HOSE due to the actual contributed charter capital of less than VND 120 billion at the Reviewed Financial Statements of the first 6 months of 2018. According to AAM's Note to Equity in the Semi-Annual Reviewed Financial Statements 2018 – Page 42/42, it is easy to see that during the period AAM has reduced its actual contributed charter capital by deleting the number of Treasury Shares previously purchased, the shortfall is offset by Capital Surplus. Regarding Equity, Actual Contributed Charter Capital and Capital Surplus, you can find out more here Charter Capital and Equity (Part 1) / (Section 2). In addition, HOSE did not forget to remind, in 1 year, if the actual contributed charter capital continues to be less than 120 billion dong, it will be delisted as stated in the Official Dispatch putting AAM shares under Warning and the possibility of Delisting.

– Profit after tax on the Annual Audited Financial Statement is negative: this is also a common mistake