State Securities Commission completes draft to amend 4 circulars

It is expected that the issuance of this circular will have a positive impact on the process of considering upgrading the Vietnamese stock market.

Implementing the program of developing legal documents of the Ministry of Finance in 2024, on March 22, 2024, the State Securities Commission posted the draft circular amending and supplementing a number of articles of the circulars regulating: Securities transactions on the securities trading system; clearing and settlement of securities transactions; activities of securities companies and information disclosure on the securities market (draft circular) on the Government's electronic information portal, the Ministry of Finance's electronic information portal and the State Securities Commission's electronic information portal (draft in Vietnamese and English).

After the period of posting to collect opinions from affected subjects according to the provisions of the Law on Promulgation of Legal Documents, the State Committee has received and completed the draft circular.

The draft circular has many new and more open regulations for foreign investors.

Specifically, foreign investors who are organizations trading to buy stocks are not required to have enough cash. Accordingly, the draft is expected to amend and supplement Circular 120/2020/TT-BTC regulating the trading of listed stocks, registration of trading and fund certificates, corporate bonds, and listed warrants on the trading system (Circular 120) stipulating that investors must have enough money when placing orders to buy securities, except for the following transactions: Margin transactions as prescribed in Article 9 of this Circular; stock purchase transactions that do not require enough money when placing orders by foreign investors who are organizations as prescribed in Article 9a of this Circular.

The draft adds Article 9a after Article 9 to regulate the purchase of shares by foreign institutional investors. Securities companies shall assess the payment risk of foreign institutional investors to determine the amount of money required when placing an order to purchase shares (if any) according to the agreement between the securities company and the foreign institutional investor.

In case the foreign investor is an organization that fails to make full payment for the stock purchase transaction, the obligation to pay the remaining amount shall be transferred to the securities company where the foreign investor is an organization that places the order through the self-trading account.

A securities company is allowed to sell by agreement on the securities trading system or transfer ownership outside the securities trading system according to regulations on registration, depository, clearing and payment of securities transactions for the number of shares transferred to its proprietary trading account to a foreign investor who is an organization lacking money to pay for the purchase of shares no later than the trading day following the day the shares are recorded in the securities company's proprietary trading account in case this transaction does not exceed the maximum limit on the ownership ratio of foreign investors according to the law for that share.

Financial amounts arising from transactions are made according to the agreement between the securities company and the foreign institutional investor or the authorized representative of the foreign institutional investor.

Except for the transactions specified in Clause 3 of this Article, securities companies shall sell shares on the securities trading system. Financial amounts arising from the transaction shall be made according to the agreement between the securities company and the foreign institutional investor or the authorized representative of the foreign institutional investor.

The depository bank where the foreign institutional investor opens a securities depository account is responsible for paying the shortfall and any costs incurred (if any) in case of incorrect confirmation of the deposit balance of the foreign institutional investor with the securities company, leading to a shortage of money to pay for the stock purchase transaction.

The draft circular also adds Article 35a after Article 35, regulating the payment for stock purchase transactions of foreign institutional investors. Accordingly, foreign institutional investors placing stock purchase orders must have sufficient funds in their accounts before the time when the depository member must transfer money to the depository member's deposit account at the payment bank to make payment for the securities transaction. The clearing and payment for stock purchase transactions shall be carried out in accordance with the law and regulations of the Vietnam Securities Depository and Clearing Corporation (VSDC).

In case the foreign institutional investor placing the order to buy shares fails to make full payment as prescribed, VSDC shall transfer the remaining payment obligation for the purchase of shares of the foreign institutional investor to the obligation of the securities company where the investor places the order to buy shares (through the securities company's proprietary account) on the payment date.

Accordingly, in case a foreign investor is an organization that opens a depository account at a securities company, the securities company will notify VSDC that the foreign investor does not have enough money to pay for the stock purchase transaction and the transaction information is requested to be converted into the payment obligation of the securities company.

In case the foreign investor is an organization that opens a depository account at a custodian bank, the custodian bank shall notify VSDC that the foreign investor does not have enough money to pay for the stock purchase transaction and refuse to pay for the transaction that lacks money.

Securities companies must ensure sufficient funds to pay for transactions as prescribed. Securities companies will be subject to penalties in accordance with the law and VSDC's Regulations in case they fail to ensure the performance of their obligations as prescribed.

The draft circular also amends and supplements a number of articles of Circular No. 121/2020/TT-BTC of the Ministry of Finance: Regulations on the operations of securities companies (Circular No. 121). Specifically, Clause 8, Article 16 is amended as follows:

In case a customer opens a depository account at a depository member that is not a trading member, the trading member and the depository member must sign a contract agreeing on the responsibility to ensure the principle that the trading member is responsible for executing the transaction order, the depository member is responsible for checking the customer's cash and securities balance and ensuring payment to the customer according to the law, except in the case where the securities company receives an order to buy shares from a foreign institutional investor when there is not enough money.

The draft also adds a provision that securities companies that receive orders to buy shares from foreign investors who are organizations that do not require sufficient funds when placing orders must comply with the limit for receiving orders to buy shares; must not receive orders to buy shares from the parent company of the securities company; and must not receive orders to buy shares from the securities company itself.

Securities companies must determine the limit for receiving orders to purchase shares at the beginning of the trading day and keep documents and information determining this limit. The limit for receiving orders to purchase shares is determined as follows: The limit for receiving orders to purchase shares using amounts that can be converted into cash of the securities company but must not exceed the difference between 2 times the value of the securities company's equity and the outstanding balance of securities margin trading.

Regarding information disclosure and information disclosure roadmap in English. The Circular also amends and supplements a number of articles of Circular No. 96/2020/TT-BTC of the Minister of Finance guiding information disclosure on the stock market. Amend and supplement Article 5 as follows to regulate the language of information disclosure on the stock market.

Accordingly, the language of information disclosed on the stock market is Vietnamese. Listed organizations, public companies, Stock Exchanges, and VSDC shall simultaneously disclose information in English according to the provisions of Clauses 2 and 3 of this Article.

Information published in English must be consistent with the content of information published in Vietnamese. In case there is a difference or different understanding between information in Vietnamese and English, information in Vietnamese shall be the original information for reference.

Listed organizations and large-scale public companies shall simultaneously disclose information in English according to the following roadmap: Listed organizations and large-scale public companies shall periodically disclose information simultaneously in English from January 1, 2025.

Listed organizations and large-scale public companies shall disclose extraordinary information, disclose information upon request, and disclose information on other activities of public companies simultaneously in English from January 1, 2026.

Public companies not subject to the provisions of Points a and b of this Clause shall periodically disclose information in English from January 1, 2027.

Public companies not subject to the provisions of Points a and b of this Clause shall disclose extraordinary information, disclose information upon request and disclose information on other activities of the public company simultaneously in English from January 1, 2028.