Many tricks to “evade the law” to move capital around by bond issuers, question the responsibility of securities companies
According to a report of the Ministry of Finance, in 2021, the corporate bond market will continue to be an important capital mobilization channel for businesses, meeting medium and long-term capital needs for many fields. (production, trade, services, energy…). Although the economy was greatly affected by the epidemic, businesses still chose to issue bonds to raise capital with the issuance volume increasing by 40.36% compared to 2020.
The volume of registration for the public offering of corporate bonds in 2021 increased to the highest level ever, reaching VND 51,125 billion, up 51.8% compared to 2020; actual issuance volume increased by 11.8%, accounting for 5.3% of total issuance volume. In the first quarter of 2022, businesses offered VND 5,486 billion of corporate bonds to the public.
The trading volume on the secondary corporate bond market, including listed corporate bonds and privately issued corporate bonds, both increased compared to 2020. Accordingly, “the demand for corporate bonds in the market is relatively large, the continued Continuing to improve the corporate bond trading system at the Stock Exchange is necessary to both enhance the transparency of the market and promote bond liquidity.
The Ministry of Finance added that corporate bond market information is becoming more and more transparent with the requirement of centralized information disclosure on the information page system for both issuers and registration and depository organizations.
Many tricks to “circumvent the law” to distribute bonds to retail individual investors
However, the corporate bond market in 2021 still has new problems, possibly risks to the development of the market. Through management and supervision, the Ministry of Finance reported to the Prime Minister the operation situation of the corporate bond market in the first 10 months of 2021 and analyzed some risks in the market.
Accordingly, in terms of individual corporate bond investors, although in the primary market, the proportion of individual investors buying corporate bonds individually decreased sharply compared to 2020, but in the secondary market, the proportion of individual investors buying corporate bonds private equity amounted to 19% of the total issued volume. To offer and buy individual corporate bonds for individual investors, the market has appeared many ways to “evade” the provisions of the law on individual securities investors.
Specifically, individual investors are certified as professional securities investors (valid within 1 year) by a contract to buy futures of government bonds or listed securities within 2-4 days; individual investors use margin loans to prove that their listed securities portfolio is holding a value of over 2 billion dong, but the actual amount of equity is lower; individuals who do not directly purchase bonds in their names but sign civil contracts with securities companies, commercial banks or other enterprises to purchase corporate bonds individually.
Regarding issuers, out of 358 private bond issuers in 2021, there are 57 issuers with loss-making business results before the issuance; 45 enterprises have a debt-to-equity ratio greater than 10 and 10 issuers have an issue volume ratio of more than 5 times equity.
Some enterprises issue to contribute capital, buy shares, buy bonds of other enterprises or lend capital to other enterprises; or issued to transfer capital “circle” to circumvent regulations on lending/investing corporate bonds of credit institutions for 1 customer/group of customers.
Question mark of responsibility of securities companies
In addition, the Ministry of Finance also said that in the market, there is a phenomenon of businesses openly offering to sell privately issued corporate bonds on the mass media. Bonds offered for sale are bonds with high interest rates (11% – 12%/year), offering information directly offered by the issuer in the primary market or offered by related businesses. on the secondary market.
Regarding service providers, according to the Ministry of Finance, an organization advising on bond offering documents is a securities company that provides consulting, review, and support services in developing individual corporate bond offering documents that meet the requirements of the Ministry of Finance. meet the regulations on conditions and bond offering documents according to Decree No. 153/2020/ND-CP and is responsible for reviewing and ensuring the compliance of the dossier. However, there is a phenomenon that some consulting organizations build favorable offering documents for businesses to raise capital without providing fully and accurately disclosed information to investors.
According to the provisions of Decree No. 153, the issuing agent organization, the bond registration and depository organization is responsible for reviewing the offering for the right professional securities investors and performing the registration and transfer of securities. transfer bonds to the right investors. However, the Ministry of Finance said that a number of issuing agency organizations and depository registration organizations provide services to legalize professional securities investor certification documents to solicit investors. individuals buy corporate bonds individually.
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