CIRCULAR

Providing regulations on operation of securities companies

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Pursuant to the Law on Securities dated November 26, 2019;

Pursuant to the Law on Enterprise dated June 17, 2020;

Pursuant to the Government's Decree No. 155/2020/ND-CP dated December 31, 2020, on detailing the implementation of a number of articles of the Law on Securities;

Pursuant to Government’s Decree No. 87/2017/ND-CP dated July 26, 2017, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the proposal of the Chairperson of the State Securities Commission;

The Minister of Finance hereby promulgates the Circular providing regulations on operation of securities companies.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation and subjects of application

1. Scope of regulation

This Circular provides for the operation of securities companies in Vietnam, including:

a) Governance and management of securities companies;

b) Professional operations of securities companies;

c) Financial regulations applicable to securities companies;

d) Reporting regime.

2. Subjects of application

a) Securities companies;

b) Organizations and individuals involved in the operation of securities companies.

Article 2. Interpretation of terms

In this Circular, the terms below are construed as follows:

1. Securities company means an enterprise licensed to perform one or several operations specified in Clause 1, Article 72, Clauses 1, 2, 3, 4 and 5, Article 86 of the Law on Securities by the State Securities Commission.

2. Valid dossier means a dossier containing all required documents specified in this Circular and fully filled in accordance with law.

3. Liquidity capital means the difference between short-term assets and short-term liabilities at the time of calculation.

4. Lending means a form whereby a securities company assigns or commits to hand over to the receiver or the user an amount of money, assets or securities within a certain period of time by agreement with the principle of repayment of both principal and interests or not.

5. Reorganization of a securities company means the division, separation, consolidation, merger or conversion of an enterprise type and can only be performed between securities companies.

Chapter II

GOVERNANCE AND MANAGEMENT OF SECURITIES COMPANIES

Article 3. Principles of governance and management of securities companies

1. Securities companies shall comply with the Law on Securities, the Law on Enterprise, the company's charter, and other relevant laws on company governance.

2. Securities companies shall clearly define responsibilities of the Shareholders’ General Meeting, Members’ Council, Owner, Board of Directors, Control Board and Directorate in accordance with the Law on Securities, Law on Enterprises and other relevant laws.

3. Securities companies shall set up a system for communication with their shareholders and members to ensure provision of sufficient information and fair treatment among shareholders and members and guarantee the rights and legitimate interests of shareholders and members.

4. Securities companies must establish internal control and manage risk systems to supervise, prevent conflicts of interest within the company and in transactions with affiliated persons.

5. Securities companies must ensure that employees working in the professional department must have securities practice certificates in accordance with the profession performed under the provisions of the Law on Securities and securities market.

Article 4. Principles of professional operations of securities companies

A securities company when performing professional operations must ensure the following principles:

1. Professional processes must be issued.

2. Rules of professional practice ethics must be issued.

3. A securities company and its employees are not allowed to make investments on behalf of clients, except for the case of entrusting the management of securities trading accounts of individual investors as specified in Article 19 of this Circular.

4. A securities company must be honest toward their clients and may not infringe upon the assets, rights and other legitimate interests of their clients. A securities company must separately manage assets of each client, manage assets owned by their clients from those of securities company.

5. A securities company must be responsible for signing contracts with clients when providing services to them; provide complete and honest information to clients. 

6. Unless otherwise provided by law, a securities company providing services to clients may neither directly nor indirectly commit the following acts:

a) Making securities investment decisions on clients’ behalf;

b) Reaching agreement with clients on profit- or loss-sharing;

c) Advertising or declaring that its securities analyses, analysis efficiency or method is of higher value than that of another securities company;

d) Providing untruthful information to entice or call upon clients to purchase or sell a certain type of securities;

dd) Providing falsified, deceiving or misleading information to clients;

e) Other acts in violation of law.

7. Implementing the regime of accounting, auditing, statistics, and financial obligations according to the law.

8. Promptly, fully and accurately disclosing information and report in accordance with law.

9. Building information technology systems, backup databases to ensure safe and continuous operations.

10. Supervising securities transactions according to regulations of the Minister of Finance.

11. A securities company shall set up a specialized section in charge of communication with clients and settlement of client questions and complaints.

12. Implementing other obligations in accordance with the law on securities and relevant laws.

Article 5. Securities company’s charter

 A securities company, when developing the company's charter, in addition to complying with this Circular must comply with the following principles:

1. The charter of a securities company must not be contrary to the provisions of the Law on Securities and the Law on Enterprises.

2. A securities company which is a public company, shall base on the Law on Securities, the Law on Enterprises and this Circular to develop the company's charter. A securities company must refer to the Charter template applicable to public companies in accordance with the law on company governance applicable to public companies when developing the company's charter.

3. A securities company which is a non-public joint stock company or a limited liability company, when developing its charter in accordance with the provisions of the Law on Securities and the Law on Enterprises.

4. A securities company, when developing the company's charter, must refer to Clauses 2 and 3 of this Article. In addition, the company’s charter must specify the following contents:

a) Operation network;

b) Scope of business operation;

c) Principle of operation;

d) Information about the establishment and securities business license;

dd) Board of Directors/Members’ Council, criteria for members of the Board of Directors/Members' Council;

e) General Directorate (Directorate), criteria for members of the General Directorate (Directorate); Internal Control Board, criteria for members of the Internal Control Board;

g) Auditing Committee, criteria for members of Auditing Committee;

h) Preventing conflicts of interest;

i) Reorganization of securities companies: division, split up, consolidation, merger or conversion of securities company.

5. A securities company must publish the entire company's charter on its official website.

Article 6. Shareholders and members

1. Shareholders and capital contributors of a securities company must comply with Points c and d, Clause 2, Article 74 of the Law on Securities.

2. Shareholders and capital contributors that hold 10% or more of the charter capital of a securities company may not abuse their advantage to cause harms to the rights and interests of the company and other shareholders and members.

3. Shareholders and capital contributors that hold 10% or more of the charter capital of a securities company shall fully notify the securities company within 24 hours after receiving information of the following:

a) The number of shares or contributed capital amount which are frozen, pledged or handled under court rulings;

b) Institutional shareholders and members that have decided on the renaming, division, split up, dissolution or bankruptcy.

4. A securities company shall report to the State Securities Commission on the cases specified in Clause 3 of this Article within 05 days after receiving notices from its shareholders or members.

Article 7. Shareholders’ General Meeting, Members’ Council and the owner of the company

1. A securities company shall elaborate the internal procedures and order for convening and voting at meetings of the Shareholders’ General Meeting or Members’ Council and must have such procedures and order approved by the Shareholders’ General Meeting or Members’ Council.

2. A securities joint-stock company shall convene an annual meeting of the Shareholders’ General Meeting within 04 months after the end of a fiscal year. In case it is unable to organize within the above-mentioned time limit, it shall report in writing to the State Securities Commission, clearly stating the reason and convene an annual meeting of the Shareholders’ General Meeting within 02 subsequent months.

3. The public securities company shall disclose information about the decisions of the Shareholders’ General Meeting in accordance with the law on securities and the securities market on information disclosure.

4. A securities company shall send a report on results of a meeting of the Shareholders’ General Meeting, Members’ Council and the owner enclosed with relevant documents to the State Securities Commission within 05 working days after such meeting concludes.

5. Shareholders’ General Meeting, Members’ Council and the owner of the securities company shall, through an accredited audit firm, audit the financial statements and the financial safety ratio report. In the same fiscal year, the securities company shall not be allowed to change the accredited audit firm, unless the parent company changes an accredited audit firm or an accredited audit firm is suspended or disqualified for an audited approval.

Article 8. Board of Directors and Members’ Council

1. A member of the Board of Directors or Members’ Council of a securities company may not concurrently act as a member of the Board of Directors or Members’ Council or the Chief Executive Officer of another securities company.

2. Functions, duties and authorization content for the Board of Directors, Board of Members, president of the company, each member of the Board of Directors, and each member of the Members' Council must be specified in the company's charter.

3. The Board of Directors or Members’ Council shall elaborate the internal procedures and order for convening and voting at its meetings.

4. The Board of Directors or Members’ Council shall set up units or appoint persons to take charge of risk management in accordance with Article 11 of this Circular and internal control in accordance with Article 12 of this Circular.

Article 9. Control Board and internal audit

1. A securities company operating under the model specified at Point a, Clause 1, Article 137 of the Law on Enterprises must ensure the implementation of the following:

a) The head of the Control Board of a securities company may not concurrently act as a member of the Control Board or a manager of another securities company;

b) The Control Board shall elaborate the control process which must be approved by the Shareholders’ General Meeting or Members’ Council;

c) A Control Board which consists of 02 members or more shall meet at least twice a year. The minutes of a meeting must be made in a truthful manner, fully recording all details of the meeting, and be preserved in accordance with regulations;

d) When detecting a member of the Board of Directors, Members’ Council or General Directorate (Directorate) who commits a violation of law or the company’s charter, thus infringing upon the rights and interests of the company, shareholders, owner, clients or the Control Board shall request explanations within a certain time limit or request convening of a meeting of the Board of Directors, Members’ Council or owner for handling. For a violation of law, the Control Board shall report it writing to the State Securities Commission within 07 working days after detecting it.

2. A securities company operating under the model specified at Points a and b, Clause 1, Article 137 of the Law on Enterprises must ensure the implementation of the functions and tasks specified below:

a) To independently assess the appropriateness and compliance of policies, laws, the company's charter and decisions of the Shareholders’ General Meeting, owner, Board of Directors and Members’ Council;

b) To inspect, examine and assess the adequacy, efficiency and effectiveness of the internal control system under the General Directorate (Directorate) in order to improve this system;

c) To assess the compliance of business operations with internal policies and processes;

d) To advise on the formulation of internal policies and processes;

dd) To assess the compliance with law and control measures to assure safety of assets;

e) To assess internal audit through financial information and business activities;

 g) To assess the process of identifying, assessing and managing business risks;

h) To assess the effectiveness of activities;

i) To assess the compliance with contractual commitments;

k) To control the information technology system;

l) To investigate violations within the securities company;

m) To conduct internal audit of the securities company and its subsidiary companies.

3. Internal auditing activities must adhere to the following principles:

a) Independence: The internal audit section is independent from other sections of the securities company, including the executive board; internal auditing activities are independent from executive and professional activities of the securities company; staff members performing internal audit may neither perform jobs subject to internal audit nor concurrently work in such professional sections as brokerage, dealing, analysis, investment consultancy, issuance underwriting and risk management;

b) Objectivity: The internal audit section and its staff shall ensure the objectivity, fairness and impartiality in the course of performing their tasks. The securities company shall ensure that the internal audit section is free from any intervention when it properly performs its tasks;

 Internal audit staff shall show objectivity in the course of collecting, assessing and communicating information on activities or processes and systems which have been or are being audited. Internal auditors shall make fair assessment of all relevant matters and must not be influenced by self-seeking motivation or anyone else when making comments and assessments;

c) Honesty: Internal auditors shall perform their work in an honest, prudent and responsible manner; abide by law and perform jobs publicly in accordance with law and professional regulations;

d) Confidentiality: Staff of the internal audit section must respect the value and ownership of received information and may not disclose information without valid authorization, unless they are obliged to do so by law and internal regulations of the company.

4. The personnel of the internal auditing section must meet the following criteria:

a) Persons working in this section have not been sanctioned with fine or higher penalty for a violation in the field of securities, banking or insurance within the 05 years prior to the year of appointment;

b) The head of the internal audit section must have professional qualifications in law, accounting and audit; be adequately experienced, prestigious and competent to effectively perform the assigned tasks;

c) Persons working in this section are not affiliated to the heads of professional sections, persons performing professional operations, the Chief Executive Officer, Chief Operations Officers or branch directors of the securities company;

d) Persons working in this section must possess a certificate of training in basic securities and securities market issues and a certificate of training in securities and securities market law or a securities practice certificate;

e) A person working in this section may not concurrently perform other jobs in the securities company.

Article 10. Directorate

1. The Chief Executive Officer shall manage daily business activities of the securities company, submit to supervision by the Board of Directors, Members’ Council and the owner and take responsibility before the Board of Directors, Members’ Council and the owner and law for the exercise of his/her rights and performance of his/her tasks.

2. The Chief Executive Officer and Chief Operations Officers of a securities company may not concurrently work for another securities company, fund management company or business; the Chief Executive Officer of a securities company may not act as a member of the Board of Directors or Members’ Council of another securities company.

3. The Chief Executive Officer and Chief Operations Officers in charge of operations must meet the criteria specified in Clause 5, Article 74 of the Law on Securities.

4. A securities company shall elaborate a working regulation of its General Directorate (Directorate) which must be approved by its Board of Directors, Members’ Council and the owner. A working regulation must have the following principal contents:

a) Specific responsibilities and tasks of members of the General Directorate (Directorate);

b) The order and procedures for convening of and participation in meetings;

c) Responsibility of the General Directorate (Directorate) to report to the Board of Directors, Members Council, the owner and Control Board.

Article 11. Risk management

1. The Board of Directors, Members’ Council or owner of securities company must build a risk management system according to the following principles:

a) The system of risk management must at least provide for the following:

- The responsibility of the Board of Directors, Members’ Council or owner of the securities company in risk management;

- The responsibility of the Chief Executive Officer, Control Board and internal audit and the internal control system in risk management;

- The responsibility of the risk management section and chiefs of operations of the securities company in risk management;

- A clear and transparent risk management strategy reflected in the risk policy in the long term and in each specific period approved by the Board of Directors or the Members' Council or the Owner;

- Implementation plan through sufficient policies and processes;

- Regular inspection and review management of the Chief Executive Officer;

- Issuing and fully implementing risk management policies, processes and limits, establishing appropriate risk management information activities.

b) The risk management system shall be established to ensure that securities companies have the ability to identify, measure, monitor, report and handle serious risks effectively while fully meeting its compliance obligations at all times;

c) The risk management system must be built to ensure independence, objectivity, honesty, and consistency.

d) The risk management system shall be established to ensure separation and independence between the operational section and the risk management section. The person in charge of the operational section shall be not concurrently in charge of the risk management section and vice versa.

2. The process, internal regulations on risk management in securities company must ensure the following principles:

a) The risk management system in the securities company must be operated based on the written internal procedures and regulations;

b) Internal procedures and regulations must be clearly presented so that all involved individuals understand their duties and responsibilities and can describe in detail the specific risk management process involved. A securities company must regularly review and update these internal processes and regulations;

c) The internal processes and regulations must ensure that state management agencies, internal audit, internal control, and the control board understand the risk management activities of the company;

d) The internal process and regulations on risk management must contain at least the following:

- Organizational structure and description of functions, tasks, decentralization mechanism, decision authority and responsibility;

- Risk policy and limit, process of determination of risks, risk measurement and monitoring, report to exchange of information about risks and risk processing;

- The rules must ensure the obligation to comply with the law.

3. A securities company shall build a system of risk management process including the following: Risk determination, measurement, monitoring, monitoring, and risk processing.

4. Developing a back-up plan

a) A securities company shall develop back-up plans for emergencies to ensure continuity in the company's business operations;

b) The Chief Executive Officer shall be responsible for formulating and regularly reviewing the back-up plan. The back-up plan must be approved by the Board of Directors or Members' Council or the owner of the company.

5. Principles of record-keeping, documents

a) All records, documents, reports, meeting minutes, resolutions of the Board of Directors or Members' Council or decisions of the owner, risk reports, decisions of the General Director (Director) and other documents related to risk management must be fully archived and made available to State management agencies up on request;

b) Time for archival of documents specified at Point a, Clause 5 of this Article shall comply with the laws.

Article 12. Internal control

1. A securities company shall set up an internal control section under the General Directorate (Directorate). The internal control system consists of apparatus and independent and full-time personnel and processes.

2. The internal control department under the General Directorate (Directorate) shall be responsible for controlling compliance:

a) Examining and supervising the compliance with law, company charter and decisions of the Shareholders’ General Meeting, decisions of the Board of Directors, regulations, professional processes and risk management process of the company, related sections and securities practitioners of the company;

b) Supervising the implementation of internal regulations and activities likely to lead to conflicts of interest within the company, especially business activities of the company and personal transactions of the company’s employees; supervising the discharge of responsibilities of the company’s officers and employees and fulfillment of responsibilities of partners for authorized activities;

c) Examining contents and supervising the observance of rules of professional ethics;

d) Supervising the calculation of financial safety ratios and compliance with regulations on financial safety assurance;

dd) Separation of assets of clients;

e) Preservation and storage of assets of clients;

g) Controlling the compliance with the law against money laundering;

h) Other tasks as assigned by the Chief Executive Officer.

3. A securities company shall set up an internal control system which consists of the organizational apparatus and internal processes and regulations applicable to all positions, units, sections and activities of the company in order to achieve the following objectives:

a) Activities of the securities company comply with the Law on Securities and relevant documents;

b) Interests of clients are guaranteed;

c) Activities of the securities company are safe and effective; its assets and resources are protected, managed and used in a safe and effective manner;

d) The financial and management information system provides truthful, rational, adequate and timely information; financial statements of the company are truthful.

4. Personnel requirements of the internal control section

A) At least 01 staff is assigned to act as a compliance controller;

b) The head of the internal control section must have professional qualifications in law, accounting and audit; be adequately experienced, prestigious and competent to effectively perform the assigned tasks;

c) Persons working in this section are not affiliated to the heads of professional sections, persons performing professional operations, the Chief Executive Officer, Chief Operations Officers or branch directors of the securities company;

d) Persons working in this section must possess a certificate of basic issues of securities and securities markets or a securities practice certificate, and legal certificate of securities and securities markets;

e) A person working in this section may not concurrently perform other jobs in the securities company.

Chapter III

PROFESSIONAL OPERATIONS OF SECURITIES COMPANIES

Article 13. Responsibilities of securities companies when performing securities brokerage operations

1. Securities companies shall arrange their securities practitioners to perform the following jobs:

a) Providing consultancy on and explaining contracts and carrying out procedures for opening securities trading accounts for clients;

b) Providing consultancy on securities transactions to clients;

c) Receiving and controlling securities trading orders of clients;

d) Acting as heads of sections related to the securities brokerage operation.

2. Securities companies shall comply with current regulations on anti-money laundering.

3. Data on brokerage accounts of clients that open accounts at securities companies must be managed in a centralized manner and cached at another place for the backup purpose.

4. A securities company performing the securities brokerage operation may not:

a) Give groundless opinions on securities price increase or decrease in order to entice clients to participate in trading;

b) Agree upon or offer particular interest rates or sharing of profits or losses with clients in order to entice clients to participate in trading;

c) Directly or indirectly set up fixed places outside transaction places approved by the State Securities Commission for signing contracts to open trading accounts with clients, receiving and executing securities trading orders or paying for securities transactions with clients, except for online securities transactions;

d) Receive orders or pay for transactions with persons other than trading account holders without the latter’s written authorization;

dd) Reveal contents of trading orders placed by clients or other confidential information acquired through conducting transactions for clients which are not for information disclosure or up on requests for inspection and examination as prescribed by law;

e) Use names or accounts of clients for securities registration and trading;

g) Infringe upon assets, rights and other interests of clients.

Article 14. Responsibility of a securities company toward clients when performing brokerage operations

1. A securities company, when performing brokerage operations, must comply with Clauses 1, 2 and 3, Article 91 of the Law on Securities.

2. A securities company is obliged to update changed information of clients at the latter’s request.

3. A securities company shall sign contracts on opening of trading accounts for their clients and directly conduct securities transactions for their clients and take responsibility before law for these activities.

4. A securities company must monitor in detail money and securities of each client, provide information on the balance and newly added amounts of money and securities to clients at their request.

5. A securities company must publish securities transaction fees before their clients make transactions, and must publish securities transaction fees on its website.

6. A securities company shall set up a specialized section in charge of communication with clients and settlement of client questions and complaints.

Article 15. Opening of securities trading accounts

1. To conduct securities purchase or sale transactions for its clients, a securities company shall carry out procedures for opening a trading account for each client upon a contract on opening of a securities trading account with that client. A contract on opening of an account must satisfy the current regulations and contain the minimum contents in the form provided in Appendix III attached to this Circular.

2. A securities company is obliged to explain contents of contracts on opening of trading accounts and relevant procedures for conducting securities transactions for their clients, and inquire about clients’ financial and risk-bearing capability and profit expectations.

3. A contract on opening of a securities trading account specified in Clause 1 of this Article must not contain the following agreements:

a) Agreement to shirk legal obligations of the securities company without any plausible reason;

b) Agreement to narrow the scope of compensation payment by the securities company without any plausible reason or to transfer risks from the securities company to its clients;

c) Agreement to unfairly force clients to perform the compensation obligation;

d) Agreements to unfairly place clients at a disadvantage.

4. Investors that open accounts at securities companies shall fully fill information in account opening contracts.

Article 16. Receipt and execution of trading orders

1. Securities companies may receive orders of their clients in the following forms:

a) Receiving order slips directly at transaction counters;

b) Receiving remote orders via telephone, facsimile, Internet or other transmission lines.

2. Securities companies conduct online securities transactions as prescribed in Article 201 of the Decree detailing a number of articles of the Law on Securities.

3. In case of receiving securities trading orders online or via telephone, facsimile or other transmission lines, securities companies shall:

a) Comply with the E-Transaction Law and guiding documents;

b) Authenticate the client and assure full recording of information at the time of order receipt and keep proofs of clients’ orders, so that can be searched when necessary;

c) Adhere to the principle of confirmation with clients before entering their orders into the trading system;

d) Take measures to assure safety and security of transmission lines and appropriate remedies in case securities companies are unable to enter orders of clients into the trading system.

4. Securities companies may execute an order of a client only when such order has sufficient and accurate information on the client, trading date, time to receive the order, securities code, trading method, type of order, securities volume and trading price. Trading orders of clients must have the time (date, hour, minute) of receipt recorded by securities companies at the time of receipt.

5. Securities companies shall execute trading orders of their clients in a swift and accurate manner.

6. A securities company, when making payment for clients to buy or sell securities, must ensure sufficient money and securities as prescribed and shall take necessary measures to assure the solvency of such clients when trading orders are executed.

7. Securities companies shall notify results of execution of trading orders to clients immediately after such orders are matched by the method agreed upon by clients and securities companies in contracts.

8. In case clients open depository accounts at depository members other than trading members, those depository members and trading members shall sign contracts of agreement on the responsibility for ensuring the principle that trading members shall execute trading orders and depository members shall inspect the ratio of deposited money and securities of clients and make payments to clients in accordance with law.

Article 17. Management of money of clients

1. Securities companies shall manage separately money amounts deposited for securities trading of each client and separate money of their clients from the securities companies’ own money.

2. Securities companies may not directly receive and pay cash for securities transactions of their clients but shall make payments for such transactions via commercial banks.

3. Securities companies may not abuse money of their clients in any form. Transactions related to money of clients may only be conducted in accordance with law.

4. A securities company shall build a system for separately managing money of clients by the method provided at Point a of this Clause. In addition, a securities company may additionally build a system by the method provided at Point b of this Clause for clients to choose:

a) Clients of the securities company open accounts directly at a commercial bank selected by the securities company for managing money for securities trading. By this method, clients, the securities company and the commercial banks agree in a contract on the method of certification and freezing of the money balance and transfer of payments for securities transactions of clients. After securities purchase orders of clients are matched, the securities company may request the bank at which investors open their accounts to transfer money amounts equal to the value of matched orders to the securities trading payment account opened by the securities company at the commercial bank selected by the securities company. The securities company is obliged to pay on clients’ behalf for securities transactions to involved parties.

b) The securities company opens a special-use account at a commercial bank for managing securities trading deposits of clients. A special-use account must be opened separately from other accounts of the securities company.

Such a special-use account serves only transactions of clients, specifically as follows:

- Clients remit or transfer money into their securities trading accounts;

- Clients withdraw or transfer money from their securities trading accounts;

- Clients pay for securities transactions;

- Clients deposit money in a margin account for securities trading or remit money for their securities bids;

- Clients make payments to exercise the right to purchase securities;

- Other cases of payment by clients at their request and in compliance with law.

The securities company shall set up an accounting system to manage money deposited by each investor. It shall clearly identify the balance of each client at any time and provide a detailed statement of the money balance of each client at any time at the request of such client or a competent state agency.

The securities company shall ensure to perform all clients’ requests for money withdrawal or transfer within their money balance when they no longer have liabilities payable to the securities company.

The securities company may not receive authorization from clients to transfer money internally among accounts of such clients.

5. Securities companies shall post up on their websites and at their branches and transaction offices lists of commercial banks selected for the two methods of managing securities trading money of clients.

6. Within 03 working days after signing a contract specified at Points a and b, Clause 4 of this Article, a securities company shall send to the State Securities Commission a report enclosed with a valid copy of the contract between it and the commercial bank.

7. In the case of weekly reporting, before 16:00 hours every Monday or the first working day of a week, a securities company having a special-use account shall send to the State Securities Commission a report on the number and money balance of clients on the special-use account opened by the securities company at a commercial bank, made according to the form provided in Appendix II attached to this Circular. Data to be reported are those obtained at the end of the working day preceding the reporting day.

Article 18. Management of securities of clients

1. For securities registered for centralized depository:

a) Securities companies shall manage securities owned by their clients separately from their own securities;

b) Securities companies must re-deposit clients' securities into the Vietnam Securities Depository and Clearing Corporation in accordance with the law on registration, depository, clearing payment for securities transactions;

c) Securities companies shall promptly and adequately notify their clients of the benefits arising from clients’ securities;

d) Securities depository, withdrawal and account transfer must be made according to clients’ orders and regulations on securities registration, depository, clearing and payment.

2. For securities not yet registered for centralized depository, securities companies may register and deposit securities of their clients at their offices under contracts signed with such clients and in accordance with Articles 21 of this Circular.

Article 19. Entrusting management of securities trading accounts of individual investors

1. General principles

a) The securities company licensed for securities brokerage under the provisions of Clause 1, Article 86 of the Law on Securities is allowed to provide entrustment services to manage securities trading accounts of individual investors;

b) The provision of services to investors shall be performed on the basis of a contract between a securities company and an individual investor;

c) A securities company may not be entrusted to decide on all transactions on securities trading accounts on behalf of individual investors. Clients shall clearly state specific entrusted contents in accordance with Clause 2 of this Article;

d) Securities allowed to be purchased or sold under entrustment are stocks and investment fund certificates listed on the Stock Exchanges, excluding securities registered for trading on the trading systems of unlisted public companies (UpCom);

dd/ Securities companies shall designate their securities practitioners possessing financial analysis or fund management practice certificates to manage trading accounts under entrustment. This designation shall be specified in the contract signed between the company and the individual investor.

2. The scope of entrustment covers:

a) Type of securities to be traded;

b) Maximum volume for each type of securities which can be purchased or sold;

c) Maximum value for each trading order;

d) Maximum total trading value for each trading day;

dd) Trading method and type of trading orders.

3. Securities companies shall summarize information on financial capacity, investment duration and objectives, acceptable risks, investment limitations, portfolio of invested securities (if any) and other requirements of clients before signing contracts. In case clients fail to provide sufficient information or provide untruthful information, securities companies may refuse to sign contracts.

4. Entrustment contracts

a) The term of an entrustment contract must not exceed 01 year from the date of its signing.

b) An entrustment contract must have at least the following details:

- Information on the client;

- Information on the practitioner assigned to manage the clients’ accounts;

- Entrustment contents;

- Rights and obligations of the contracting parties;

- Charge for contract management and bonuses;

- Method of payment and contract liquidation;

- Method of dispute settlement.

5. In case securities companies fail to properly perform contracts signed with their clients, causing damage to clients, they shall pay compensations for entrusting clients under written agreements between the two parties. In case a profit is made, such profit belongs to entrusting clients.

6. Rights and obligation of an entrusted securities company

a) To act honestly and in the best interest of clients and refrain from using information on clients to earn profits for itself and cause damage to clients;

b) To request clients to provide sufficient necessary information;

c) To purchase or sell securities within the scope of entrustment;

d) To give clear explanations and provide sufficient information to clients on any risk which may occur in the entrustment of management of securities trading accounts;

dd) To provide monthly or extraordinary statements of transactions at the request of entrusting clients;

e) To notify clients within 24 hours after the assets on such clients’ accounts for entrusted transactions fall below 25% of the total value of the entrustment contracts;

g) To make monthly reports (according to the form provided in Appendix II to this Circular) or reports at the request of the State Securities Commission on the management of accounts for entrusted transactions;

h) To provide a list of securities practitioners qualified for selection by clients to manage their entrustment accounts;

i) To set up an independent supervision section to supervise the management of securities transactions on accounts for entrusted transactions of securities practitioners in order to assure that transactions on such accounts conform with entrustment contracts and investment objectives of clients;

k) To assure that the time of execution of any trading order under entrustment contracts is accurately recorded;

l) To notify clients and obtain their written consent in case of investment in securities subject to issuance underwriting provided by the securities company during the period of issuance underwriting.

Article 20. Online securities transactions

1. Obligations of a securities company when providing online securities transaction services

a) Ensuring continuous and uninterrupted transactions;

b) Ensuring security, safety and confidentiality of the system's data;

c) Ensuring the backup system, the replacement plan in case of incidents;

d) Ensuring the separation from other electronic information systems of the company;

dd) Promulgating the process of operating, managing and using the online securities transaction system.

2. When providing online securities transaction services to clients, securities company must sign contracts or appendices attached to contracts to open accounts for clients, including the following contents:

a) Disclosure of possible risks of online securities transactions;

b) Responsibilities of clients and securities companies on the privacy of clients' online transactions.

3. Securities companies must report to the State Securities Commission on online securities transactions, status of online securities transactions system and information disclosure in accordance with the E-Transaction Law and guiding documents.

Article 21. Securities registration, depository operation and clearing payment

1. Scope of implementation

a) Providing securities registration and depository services for clients;

b) Making payments for securities transactions on the Stock Exchanges for clients;

c) Providing shareholder book management and transfer agency services at the request of issuing institutions other than public companies.

2. Rights and obligation of a securities company

a) To open securities depository accounts for clients at the securities company, manage these accounts in accordance with law. Securities depository accounts of clients must be separated from its own securities depository account;

b) To record accurately and adequately and update information on clients who open depository accounts and securities owned by clients who have deposited at the company;

c) To preserve, store, collect and process data related to the securities registration, depository operation and clearing payment of clients;

d) To elaborate processes of registration, depository, clearing payment, shareholder book management, transfer agency and internal control in order to manage and protect the interests of clients or securities owners;

 dd) To collect charges for securities registration and depository operations and other charges prescribed by law.

Article 22. Securities dealing operation

1. Securities companies must have sufficient money and securities amounts to pay for trading orders for their own accounts.

2. Securities dealing must be performed by a securities company in its own capacity, not in the name of another party or a person or let others use its dealing accounts.

3. The following cases are not regarded as securities dealing:

a) Purchasing or selling securities due to post-trading error correction;

b) Buying and selling their own shares.

4. Securities companies shall prioritize the execution of their clients’ orders before executing their own orders.

5. Securities companies shall notify their clients when they act as partners in agreement transactions with these clients.

6. In case securities purchase or sale orders of clients may greatly affect the price of a certain type of securities, securities companies may neither purchase nor sell in advance this type of securities for themselves or disclose information to third parties purchasing or selling these securities.  

7. When clients place limited orders for a type of securities, securities companies may neither purchase nor sell the same type of securities for themselves at a price equal to or better than clients’ prices before clients’ orders are executed.

Article 23. Securities issuance underwriting operation

1. A securities company conducting issuance underwriting of securities to the public that provides underwriting by the method of undertaking to buy part or the whole of securities of an issuing institution may only underwrite a total value of securities not larger than its equity and not exceeding 15 times the difference between the value of short-term assets and short-term liabilities stated in the latest quarterly financial statement.

2. A securities company may neither underwrite issuance under firm commitment nor act as the principal underwriter in the following cases:

a) It owns, merely by itself or together with its subsidiary companies or affiliated persons, 10% or more of the charter capital of the issuing institution, or holds control over the issuing institution, or has the right to appoint the Chief Executive Officer of the issuing institution;

b) At least 30% of the charter capital of the securities company and at least 30% of the charter capital of the issuing institution are held by the same individual or institution;

c) The issuing institution, independently or together with its subsidiary companies or affiliated persons, owns 20% or more of the charter capital of the securities company, or holds control over the securities company, or has the right to appoint the Chief Executive Officer of the securities company;

d) A member of the Board of Directors, the Chief Executive Officer or an affiliated person of the securities company is concurrently a member of the Board of Directors or the Chief Executive Officer of the issuing institution;

 dd) A member of the Board of Directors, the Chief Executive Officer or an affiliated person of the issuing institution is concurrently a member of the Board of Directors or the Chief Executive Officer of the securities company;

e) The securities company and issuing institution have the same at-law representative.

3. A securities company that underwrites the issuance of securities shall open a separate account at a commercial bank to receive investors’ deposits for securities subscription.

Article 24. Securities investment consultancy operation

1. In order to provide securities investment consultancy services to a client, a securities company shall sign a contract with such client with the following principal details:

a) Rights, obligations and responsibilities of contracting parties;

b) Scope of securities investment consultancy;

c) Mode of service provision;

d) Service charge.

2. A securities company shall collect and manage information on its clients, including:

a) Financial status of clients;

b) Investment purposes of clients;

c) Risk-bearing capability of clients;

d) Investment experience and knowledge of clients.

3. Securities investment consultancy contents must be based on reasonable and suitable grounds obtained from reliable information and logical analyses. Given securities investment recommendations must be relevant and appropriate to securities and securities market analyses. Securities and market analysis reports and investment recommendations must clearly indicate data sources and names of persons responsible for such reports or recommendations.

4. Securities companies providing investment consultancy to their clients shall assure that such clients make investment decisions based on provided sufficient information, including also contents and risks of provided products and services.

5. Securities companies shall keep confidential information received from consultancy service users in the course of providing consultancy services, unless the disclosure of such information is consented by clients or provided by law.

6. Securities companies shall provide investment consultancy relevant to clients’ investment purposes and financial status and take responsibility for analysis results and reliability of information provided to clients.

7. Securities companies may neither be allowed to provide securities investment consultancy services for companies that they hold 10% or more of the charter capital.

Article 25. Other financial services

1. A securities company, when performing other financial services as prescribed in Clause 5 Article 86 of the Law on Securities, must be relevant to and support the licensed operations of securities companies and must not affect the interests of clients, securities companies themselves and the market.

2. A securities company may neither be allowed to provide services of offering consultancy, securities listing, equitization, and valuation consultancy for the company in which they hold 10% or more of its charter capital.

3. A securities company shall be allowed to provide other financial services in accordance with the provisions of law after reporting to the State Securities Commission in writing. The State Securities Commission has the right to request to suspend the provision of other financial services of the securities company if the provision of such service is contrary to the provisions of law or causes risk to the securities market system.

Chapter IV

FINANCIAL REGULATIONS APPLICABLE TO SECURITIES COMPANIES

Article 26. Borrowing limitations

1. The total liabilities of a securities company must not exceed 05 times its equity capital. The value of total liabilities under this provision is exclusive of the following amounts:

a) Deposits of clients for securities trading;

b) Reward and welfare fund;

c) Provision for job loss allowances;

d) Provision for damage compensations for investors.

2. Short-term liabilities of a securities company must not exceed its short-term assets.

3. A securities company offering bonds shall comply with Article 31 of the Law on Securities, Decree detailing the implementation of a number of articles of the Law on Securities, the law on issuing corporate bonds and must ensure to comply with the rate specified in Clauses 1 and 2 of this Article.

Article 27. Lending limitations

1. Except for the case specified in Clause 1, Article 86 of the Law on Securities, a securities company shall not allowed to lend money or securities in any form.

2. A securities company shall not be allowed to use money or assets of the company or clients to secure payment obligations to a third party.

3. A securities company may not provide loans in any form to its owner, major shareholders; members of the Control Board, Board of Directors, Members’ Council or Directorate; chief accountant and other managerial post holders appointed by its Board of Directors and the affiliated persons of the above-mentioned subjects.

4. A securities company, which has been allowed to perform margin transactions according to the law provisions, shall be allowed to lend clients money to buy securities in the form of margin trading under the guidance of the Ministry of Finance.

5. A securities company shall be allowed to provide loans for securities to correct transaction errors, or to provide loans to perform the exchange transactions of exchange traded fund certificates or in other forms in accordance with relevant laws.

Article 28. Investment limitations

1. A securities company may neither purchase nor contribute capital for purchase of real estate, except the case of using such real estate as its head office, a branch or transaction office for directly performing its professional operations.

2. A securities company may purchase or invest in real estate in accordance with Clause 1 of this Article and fixed assets on the principle that the residual value of such real estate and fixed assets must not exceed 50% of its total asset value.

3. The total value of investment in corporate bonds of a securities company must not exceed 70% of equity. A securities company licensed to conduct securities dealing operations may buy and resell listed bonds according to relevant regulations on bond repurchase transactions.

4. A securities company may neither directly invest nor entrust other institutions and individuals to:

a) Invest in stocks or contributed capital amounts of a company that holds more than 50% of its charter capital, except for the case of purchase of odd-lot stocks at the request of clients;

b) Invest 5% or more of the charter capital of another securities company, together with affiliated person;

c) Invest more than 20% of total outstanding stocks or fund certificates of a listed institution;

d) Invest more than 15% of total outstanding stocks or fund certificates of an unlisted institution. This provision is not applicable to member, exchange traded and open-ended fund certificates;

dd) Invest in or contribute more than 10% of total contributed capital of a limited liability company or business project;

e) Invest in or contribute more than 15% of equity capital in an organization or business project;

g)  Invest more than 70% of equity in stocks, capital contributions and business projects, in which no more than 20% of equity must be invested in unlisted stocks, capital contributions and business projects.

5. A securities company may establish or purchase a fund management company as its subsidiary company. In this case, the securities company is not required to comply with the provisions of Points c, d and dd, Clause 4 of this Article. A securities company that intends to establish or purchase a fund management company as its subsidiary company must satisfy the following conditions:

a) The equity capital after capital contribution for establishment or purchase of a fund management company at least equals the charter capital prescribed for business operations currently performed by the company;

b) The working capital percentage after capital contribution for establishment or purchase of a fund management company must be at least 180%;

c) After the capital contribution for establishment or purchase of a fund management company, the securities company must ensure the borrowing limitations prescribed in Article 26 of this Circular and the investment limitations prescribed in Clause 3 of this Article and Point e, Clause 4 of this Article.

6. In case a securities company makes investment in excess of the limitations due to the issuance underwriting under firm commitments or due to the consolidation, merger or change in assets or equity capital of the securities company or a capital-contributing institution, the securities company shall apply necessary measures to comply with the investment limits prescribed in Clauses 2, 3 and 4 of this Article within 01 year.

Chapter V

REPORTING REGIME

Article 29. Reporting regime

1. The report of a securities company must be complete, timely and accurately reflect the actual situation of the securities company.

2. A securities company shall send periodic reports in electronic data files to the State Securities Commission through the information system of the State Securities Commission within the following time limits and according to the following provisions:

a) Within 05 working days of the following month, a securities company shall send a report on its operation in the month (made according to the form provided in Appendices I and II attached to this Circular);

b) Within 20 days from the end of the quarter, a securities company must send a quarterly financial statement. In case where the securities company have to prepare a consolidated quarterly financial statement, it must submit the consolidated quarterly financial statement within 30 days from the end of the quarter;

c) Within 45 days from the end of the first six months of a fiscal year, a securities company shall send to the State Securities Commission a biannual financial statement and a report on the financial prudential ratios by June 30 that is already examined by an accredited audit firm; In case where the securities company have to prepare a consolidated semi-annual financial statement, it must submit the reviewed consolidated semi-annual financial statement within 60 days from the end of the first six months of a fiscal year;

d) For annual reports:

 Before January 20 of the following year, a securities company shall send a summary report on its operation of the preceding year (made according to the form provided in Appendices I and II attached to this Circular).

 Before March 31 of the following year, a securities company shall send an annual financial statement and a report on its financial prudential ratios by December 31 of the preceding year that already audited by an accredited audit firm. In case where the securities company have to prepare a consolidated annual financial statement, it must submit the consolidated annual financial statement audited within 100 days from the end of the fiscal year.

dd) Financial statements of a securities company sent to the State Securities Commission as prescribed at Points b, c and d of this Clause must have all the components and contents in accordance with the provisions of the accounting law for securities companies;

e) In case where a financial statement contains an qualified audit opinion without specifying in detail the exceptional item and reason for exception, a securities company shall make a written explanation with the auditor’s certification and send it to the State Securities Commission within 30 days after sending a statement specified at Points c and d of this Clause.

3. b) Within 03 working days after the occurrence of the following events, a securities company shall report in writing to the State Securities Commission:

a) It borrows or invests in excess of the limits specified in Articles 26 and 28 of this Circular;

b) Its head office, branch or transaction bureau inaugurates operation.

4. Risk management reports

- Before January 31 and July 31 every year, a securities company shall send annual/biannual reports on risk management (made according to the form provided in Appendix IV attached to this Circular).

5. Reports upon request

In case of necessity, the State Securities Commission may request securities companies to report in writing, clearly stating reporting contents and deadline.

Chapter VI

IMPLEMENTATION PROVISIONS

Article 30. Implementation provisions

1. This Circular takes effect on February 15, 2021.

2. This Circular replaces the Circular No. 210/2012/TT-BTC dated November 30, 2012 of the Minister of Finance guiding the establishment and operation of securities companies and the Circular No. 07/2016/TT-BTC dated January 18, 2016 of the Minister of Finance on amending and supplementing a number of articles of the Circular No. 210/2012/TT-BTC dated November 30, 2012 of the Minister of Finance on guiding the establishment and operation of securities companies.

3. From the effective date of this Circular, the securities company is responsible for approving the company's charter at the nearest General Meeting of Shareholders in accordance with the Law on Securities dated November 26, 2019, the Law on Enterprises dated June 17, 2020, this Circular and relevant regulations.

4. Any problems arising in the course of implementation should be promptly reported to the Ministry of Finance for consideration, guidance and settlement./.

* All Appendices are not translated herein.