Circular No. 107/2016/TT-BTC dated June 29, 2016 of the Ministry of Finance on guiding the offering and trading of covered warrants

CIRCULAR

Guiding the offering and trading of covered warrants[1]

Pursuant to the June 29, 2006 Law on Securities;

Pursuant to the November 24, 2010 Law Amending and Supplementing a Number of Articles of the Law on Securities;

Pursuant to the November 26, 2014 Law on Enterprises;

Pursuant to the Government’s Decree No. 58/2012/ND-CP of July 20, 2012, detailing and guiding the implementation of a number of articles of the Law on Securities and Law Amending and Supplementing a Number of Articles of the Law on Securities;

Pursuant to the Government’s Decree No. 60/2015/ND-CP of June 26, 2015, amending and supplementing a number of articles of the Government’s Decree No. 58/2012/ND-CP of July 20, 2012, detailing and guiding the implementation of a number of articles of the Law on Securities and Law Amending and Supplementing a Number of Articles of the Law on Securities;

Pursuant to the Government’s Decree No. 215/2013/ND-CP of December 23, 2013, 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 promulgates the Circular guiding the offering and trading of covered warrants.

Chapter I

GENERAL PROVISIONS

Article 1.Scope of regulation and subjects of application

1. This Circular provides the offering, listing and trading of, payment for, and exercise of, covered warrants and the provision of information relating to covered warrants.

2. This Circular applies to:

a/ Securities companies, depository banks;

b/ The stock exchanges and the Vietnam Securities Depository (VSD);

c/ Investors trading in covered warrants;

d/ Related institutions and individuals.

Article 2.Interpretation of terms

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

1.Covered warrant(below referred to as warrant) means a contract between an investor and an institutional warrant issuer defined in Clause 1, Article 1 of the Government’s Decree No. 60/2015/ND-CP of June 26, 2015, amending and supplementing a number of articles of the Government’s Decree No. 58/2012/ND-CP of July 20, 2012, detailing and guiding the implementation of a number of articles of the Law on Securities and Law Amending and Supplementing a Number of Articles of the Law on Securities (below referred to as Decree No. 60/2015/ND-CP).

2.Underlying securitymeans a security used as an asset underlying a warrant.

3.Underlying security issuermeans an institution issuing securities used as assets underlying warrants.

4.Warrant issuer(below referred to as issuer) means a securities company issuing warrants.

5.Depository bankmeans a bank performing the depository and supervision of assets deposited by a warrant issuer as security for payment for issued warrants, which is not an affiliated person of such warrant issuer in accordance with the law on securities.

6.Warrant holdermeans an investor holding warrants who is concurrently a partially secured creditor of the issuer and is not a warrant issuer.

7.Call warrantmeans a type of warrant that entitles the holder to buy a specified amount of underlying securities at an exercise price or to receive a margin when the price (index) of such underlying securities is higher than the exercise price (exercise index) at the time of exercise.

8.Put warrantmeans a type of warrant that entitles the holder to sell a specified amount of underlying securities at an exercise price or to receive a margin when the price (index) of such underlying securities is lower than the exercise price (exercise index) at the time of exercise.

9.European-style warrantmeans a type of warrant that allows the holder to exercise the right only on the expiration date.

10.American-style warrantmeans a type of warrant that allows the holder to exercise the right before or on the expiry date.

11.Exercise pricemeans a price at which a warrant holder may buy (for call warrants) or sell (for put warrants) underlying securities (stocks or ETF certificates) to an issuer, or which may be used by an issuer to determine the amount of money to be paid to the warrant holder.

12.Exercise indexmeans an index used by an issuer to calculate the amount of money to be paid to the warrant holder based on the underlying asset being a securities index.

13.Conversion ratemeans an amount of warrants that need to be converted into an underlying security unit.

14.Multipliermeans an amount of money equivalent to one index point and may be used to determine the payment value when a warrant is exercised based on an underlying security being a securities index.

15.Expiration datemeans the last day on which a warrant holder may exercise his/her/its warrant.

16.Outstanding warrantmeans an unexpired warrant currently held by a holder.

17.Undigested warrantmeans a warrant newly issued but not yet held by any investor. An undigested warrant shall be deposited on the account of the issuer.

18.In-the-money warrantmeans a call warrant with its exercise price (exercise index) lower than the price (index) of the underlying security or a put warrant with its exercise price (exercise index) higher than the price (index) of the underlying security.

19.Open positionof warrants of an issuer covers all unexercised outstanding warrants of such issuer.

20.Theoretical hedgemeans a position computedbased on a risk-hedging plan stated by the issuer in its prospectus.

21.Actual hedgemeans a position computed based on an actual position on the risk-hedging account of the issuer.

Article 3.General provisions

1. The name of a warrant must be neither identical nor confusingly similar to names of other issued securities and must be in Vietnamese, possibly accompanied by numbers and symbols, and pronounceable, and consist of at least four following elements:

a/ The word“Chung quyen”(warrant), followed by the abbreviated names of the underlying security and issuer;

b/ The abbreviated name of the call warrant or put warrant;

c/ The abbreviated name of the European-style or American-style exercised right;

d/ The abbreviated name of the payment method, either in cash or by transfer of underlying security.

2. An issuer may only offer its warrants based on underlying securities specified in the list of securities which satisfy the conditions for warrant offering. An underlying security of a warrant must satisfy the following conditions:

a/ Being a stock listed on a stock exchange of Vietnam and satisfying the criteria of market capitalization, liquidity, transferability ratio and business result of the underlying security issuer and other criteria set out by the State Securities Commission; or being an ETF certificate listed on a stock exchange of Vietnam; of being a securities index developed by a stock exchange of Vietnam or developed and managed by a stock exchange of Vietnam in coordination with an international organization after obtaining approval of the State Securities Commission;

b/ Being neither subject to warning, control, special control, trading suspension nor delisting under regulations of the Stock Exchange.

3. An issuer may not offer warrants based on its own stocks and securities of institutions being its affiliated persons as prescribed by the Law on Securities.

4. Warrant offering limit:

a/ The proportion of the amount of stocks converted from issued warrants of all issuers (including also warrants based on ETF certificates with these stocks being a constituent of the reference index) to the total amount of freely transferrable stocks must not exceed the limit prescribed by the State Securities Commission.

The amount of ETF certificate units converted from issued warrants of all issuers must not exceed 100% of the total amount of outstanding ETF certificates.

The amount of stocks or ETF certificates converted from warrants must be equal to (=) the amount of warrants/conversion rate;

b/ The proportion of the amount of stocks converted from warrants in one offering of an issuer to the total amount of freely transferrable stocks must not exceed the limit set by the State Securities Commission.

c/ The proportion of the total value of warrants issued and registered to be issued by an issuer, excluding the amount of delisted or expired warrants, to the value of the liquid capital of such issuer must not exceed the limit set by the State Securities Commission, in which:

- For warrants registered to be issued by the issuer:

Total value of warrants = Registered offering price x Amount of warrants registered for offering.

- For issued warrants:

Total value of warrants = Offering price (for unlisted warrants) x Amount of unlisted warrants + Closing price of warrants on the latest trading day (for listed warrants) x Amount of listed warrants.

In case no warrant trading price has been fixed yet, the total value of warrants shall be calculated according to the offering price.

The total amount of freely transferrable stocks mentioned at Points a and b of this Clause shall be determined by the Stock Exchange.

The warrant offering limit prescribed at Point c of this Clause is applicable during the time the State Securities Commission considers granting a warrant offering certificate.

5. On a quarterly basis, the Stock Exchange shall announce the list of securities satisfying the conditions for use as underlying securities of warrants and the permitted offering limit of each underlying security. In case a security on such list no longer satisfies the conditions for use as an underlying security of warrants or there is a change in the permitted offering limit of each underlying security, the Stock Exchange shall notify such within 24 hours after the issuance of a decision to remove such security from the list of underlying securities or after the occurrence of a change in the permitted offering limit of each underlying security. Warrants issued based on an underlying security removed from the list remain valid until their expiration date and may be exercised by the method announced in the prospectus.

The State Securities Commission shall supervise the announcement of the list of securities satisfying the conditions for use as underlying securities for warrant offering by the Stock Exchange and may request the removal of a security from the above list if finding such security no longer satisfies the conditions prescribed in Clause 2 of this Article.

6. Issuers shall make collaterals to secure the payment or obtain the payment guarantee of the depository bank under Article 5 of this Circular before offering warrants and carry out hedging activities under Article 12 of this Circular.

7. Warrants shall be listed and traded on the Stock Exchanges of Vietnam.

8. Issuers shall perform their obligations toward warrant holders according to the terms and clauses of their prospectuses.

9. The State Securities Commission shall specify types of warrant, including underlying securities of warrants, type and method of exercising warrants, types of issuers’ trading account used for the hedging purpose.

Chapter II

MAIN OPERATIONS

Section 1

OFFERING AND LISTING OF WARRANTS

Article 4.Dossiers and procedures for warrant offering registration

1. Securities companies satisfying the conditions prescribed in Clause 21, Article 1 of Decree No. 60/2015/ND-CP may register their warrant offerings.

2. The registration of a warrant for initial public offering must have the following details:

a/ Type of warrant, category of warrant (call or put) and method of warrant exercise;

b/ Information on underlying securities satisfying the conditions prescribed in Clause 2, Article 3 of this Circular;

c/ Term of the warrant calculated from the offering date to the expiration date, which must be between 3 months and 2 years;

d/ Exercise price (exercise index), registered offering price, conversion rate, multiplier (in case of warrants based on securities index), which must comply with regulations of the Stock Exchange;

dd/ Amount of warrants registered for offering, which must be at least 1,000,000 units and multiples of 10;

e/ Offering limit, which satisfies the condition prescribed in Clause 4, Article 3 of this Circular.

3. An issuer may only conduct an additional offering when the amount of its outstanding warrants with the details specified in Clause 2 of this Article exceeds 80% of the total amount of issued warrants and the remaining period up to the expiration date exceeds 30 days. The details of additionally offered warrants must be identical to those of initially offered warrants and warrant adjustment information specified in Article 10 of this Circular (if any), except the offered amount and price.

4. A dossier for warrant offering registration must comprise:

a/ A warrant offering registration paper, made according to the form provided in Appendix 1 to this Circular;

b/ The minutes and resolution of the Shareholders’ General Meeting or a meeting of the Members’ Council or the decision of the owner approving the company charter which contains an article on the rights of warrant holders conformable with the provisions of this Circular and relevant regulations; approving the policy to offer the warrant and total value of warrants permitted to be offered or the proportion of the value of warrants permitted to be offered to the value of the liquid capital of the company; approving the plan on payment security and the issuer’s obligations toward warrant holders in case the issuer becomes insolvent or is consolidated, merged, dissolved or bankrupt;

c/ The decision of the Board of Directors or Members’ Council or company owner approving the decision on warrant offering. This decision must contain detailed information on the offering (type of warrant, category of warrant, underlying securities, value of the offering, offering price, amount of warrant to be offered, exercise price (exercise index), term of warrant, expected date of listing and other relevant information);

d/ Professional processes, internal control process, risk management process, plan on payment security for warrant holders and hedging plan with the contents required by the State Securities Commission; a description of the system of risk management in the warrant issuance;

dd/ A prospectus made according to the form provided in Appendix 2 to this Circular; advertising documents and information to introduce the warrant (if any);

e/ The on-principle contract on receipt of payment security assets signed with the depository bank or a written commitment on payment guarantee of the depository bank.

5. For an issuer that has obtained a certificate of warrant offering, a dossier for warrant offering registration in additional offerings or initial offerings for other warrant products must comprise:

a/ The documents specified at Points a, c and dd, Clause 4 of this Article;

b/ The other documents specified in other points, Clause 4 of this Article, if there are modifications or supplements or new relevant information.

6. A dossier for warrant offering registration prescribed in Clause 4 or 5 of this Article shall be made in one original set and sent together with its electronic files directly or by post to the State Securities Commission.

7. Issuers shall take responsibility for the accuracy, truthfulness and adequacy of information in their dossiers, ensuring the sufficiency of important information which may influence decisions of investors. When a dossier is under consideration, the issuer may update, modify or supplement the dossier in case new information arises, some information is detected to be inaccurate, some important information is omitted, or it is deemed necessary to explain a possibly misleading matter. A modifying or supplementing document must bear signatures of those who have signed the dossier for warrant offering registration or a signature of the at-law representative of the company.

8. For an initial warrant offering, within 20 working days after receiving a valid dossier set as prescribed in Clause 4 or 5 of this Article, the State Securities Commission shall consider granting a warrant offering certificate to the issuer. In case of refusal, it shall reply in writing, clearly stating the reason.

For an additional warrant offering, within 10 working days after receiving a valid dossier set prescribed in Clause 5 of this Article, the State Securities Commission shall consider granting a warrant offering certificate to the issuer. In case of refusal, it shall reply in writing, clearly stating the reason.

9. Within 24 hours after granting a warrant offering certificate, the State Securities Commission shall disclose information thereon on its website.

10. A warrant offering certificate granted by the State Securities Commission to an issuer is a written certification that the issuer and its warrant offering registration dossier fully satisfy the conditions and procedures prescribed by law.

11. Within 3 working days after receiving a warrant offering certificate, an issuer shall disclose a prospectus and an issuance notice, made according to the forms in Appendix 3 to this Circular, on its website and the Stock Exchange’s website in accordance with the law on disclosure of information on the securities market.

A warrant may be offered only after the issuer receives a warrant offering certificate and discloses the prospectus and issuance notice under this Clause.

Article 5.Payment security assets

1. Within 3 working days after receiving a warrant offering certificate, an issuer shall deposit a collateral as payment security at a depository bank or obtain a written certification of payment guarantee of the depository bank. The value of the initial security asset must be at least equal to 50% of the value of the warrant to be offered. The issuer shall send to the State Securities Commission the contract on payment of collateral as payment security signed with the depository bank or written certification of payment guarantee of the depository bank within 24 hours after signing such document.

2. A payment security asset may be money or deposit certificate or payment guarantee of the depository bank.

3. The payment security asset being money or a deposit certificate shall be deposited as collateral at the depository bank during the validity duration of warrants and maintained at least equal to 50% of the value of the issued warrants, excluding delisted warrants. This asset may not be used for pledge or mortgage or as security for loans or financial obligations of the issuer or any third party.

Article 6.Distribution of warrants

1. The distribution of warrants may be implemented only after the issuer secures that warrant purchasers can access the prospectus in the warrant offering registration dossier and sends to the State Securities Commission a written certification of payment security asset under Article 5 of this Circular.

2. The time limit for completing the distribution of warrants to investors that have registered for warrant purchase is 15 days after the warrant offering certificate takes effect. Money amounts for warrant purchase shall be remitted into a custody account opened at a bank until the warrant distribution result is certified by the State Securities Commission.

3. An issuer may transfer the undistributed amount of warrants into its dealing account and may continue to distribute them in the trading system of the Stock Exchange after listing through market-establishing activities.

Article 7.Reports on warrant distribution results and warrant listing registration

1. Within 3 working days after completing the distribution of warrants under Clause 2, Article 6 of this Circular, an issuer shall report on the warrant distribution result to the State Securities Commission and disclose information on such result, and concurrently submit a dossier for warrant depository registration to the Vietnam Securities Depository and a dossier for warrant listing registration to the Stock Exchange.

2. Documents reporting on the warrant distribution result include:

a/ A report on the warrant distribution result, made according to the form provided in Appendix 4 to this Circular;

b/ A written certification by the bank where the issuer opens a custody account of the money amount earned from the distribution.

3. Dossiers for warrant depository registration shall be made under regulations of the Vietnam Securities Depository while dossiers for warrant listing registration shall be made under regulations of the Stock Exchange.

4. Within 1 working day after receiving the documents reporting on the warrant distribution result under Clause 2 of this Article, the State Securities Commission shall certify in writing such result and send the written certification to the issuer, Stock Exchange and Vietnam Securities Depository, and at the same time disclose information on the warrant distribution result on its website.

After obtaining the certification of the warrant distribution result, the issuer may release the money amount in the custody account prescribed in Clause 2, Article 6 of this Circular.

5. Within 2 working days after receiving the certification of the warrant distribution result from the State Securities Commission and a complete and valid warrant depository registration dossier, the Vietnam Securities Depository shall grant a warrant depository registration certificate and concurrently notify such in writing to the Stock Exchange where the issuer registers for listing.

6. Within 2 working days after receiving a notice from the Vietnam Securities Depository on the grant of a warrant depository registration certificate to the issuer and a complete and valid listing registration dossier, the Stock Exchange shall issue a decision to permit the warrant listing.

7. Within 2 working days after the Stock Exchange issues a decision to permit the warrant listing, warrants may be officially traded on the system.

Article 8.Suspension or cancellation of warrant offering

1. When detecting that a dossier of application for a warrant offering certificate contains untruthful information, omits important information which may affect investment decisions and cause damage to investors, or that an issuer fails to pay a payment security collateral or to obtain a payment guarantee from a bank under Clause 1, Article 5 of this Circular, the State Securities Commission may suspend a warrant offering for up to 30 days.

2. Within 7 days after a warrant offering is suspended, the issuer shall recall issued warrants if so requested by investors and at the same time reimburse money to investors within 15 days after receiving a request.

3. After the reason for the suspension of a warrant offering is remedied, the State Securities Commission shall issue a written notice of cancellation of the suspension and warrants may continue to be offered.

4. At the expiration of the suspension duration prescribed in Clause 1 of this Article, if the reason for the suspension of a warrant offering is not remedied, the State Securities Commission shall cancel the warrant offering.

5. Within 7 days after a warrant offering is cancelled, an issuer shall recall issued warrants and at the same time reimburse money to investors within 15 days after the offering cancellation. Past this time limit, the issuer shall pay compensation for damage caused to investors according to agreements with them.

Article 9.Delisting of warrants and suspension of trading

1. Warrants shall be delisted in the following cases:

a/ The issuer terminates or suspends its operation, is consolidated, merged or dissolved or goes bankrupt or has its establishment and operation license revoked;

b/ The underlying securities are delisted or securities index cannot be identified for a reason specified in the set of principles for index identification;

c/ Past 3 months from the date of offering, the amount of outstanding warrants is smaller than 50% of the amount of issued ones. The issuer shall delist part of undistributed warrants equal to 40% of the amount of issued warrants;

d/ The proportion of the total amount of underlying securities converted from issued warrants of all issuers to the total amount of freely transferrable underlying securities exceeds a certain percentage set by the State Securities Commission. In this case, the issuer shall delist part of undistributed warrants which remain valid for under 2 months counting from the date of arising an excessive percentage to the expiration date on the following principle:

- Delisting 80% of the amount of issued warrants in case the amount of outstanding warrants is smaller than 5% of the amount of issued ones;

- Delisting 70% of the amount of issued warrants in case the amount of outstanding warrants is equal to between 5% and 10% of the amount of issued ones;

dd/ The rights under warrants have been fully exercised or warrants have expired. In this case, warrants shall be automatically delisted;

e/ In case the Stock Exchange deems it necessary to protect interests of investors and after the State Securities Commission approves the delisting.

2. An issuer may voluntarily delist part or the whole of the amount of undistributed warrants at least 1 month after the date of listing on the following principle:

a/ In case some warrants remain outstanding, the remaining amount of warrants (after subtracting the part of warrants expected to be delisted) must be equal to at least 10% of the amount of issued warrants;

b/ In case the issuer holds the whole amount of issued warrants, the issuer may request the delisting of such amount of warrants.

3. The delisting of warrants under Points a, b and e, Clause 1 of this Article shall be effected in the following order:

a/ Within 24 hours after a warrant delisting decision is issued, the issuer shall disclose the method of fixing the warrant price to be paid to the warrant holders from the date the delisting takes effect. The price fixing method must conform to the contents of the prospectus and regulations of the Stock Exchange;

b/ From the date of information disclosure prescribed at Point a of this Clause to the date preceding the date the delisting takes effect, the issuer shall redeem warrants through their market-establishing activity. The redemption price shall be fixed according to market prices and under regulations of the Stock Exchange;

c/ From the date the delisting takes effect, the issuer shall coordinate with the Vietnam Securities Depository in paying money to investors that still hold warrants at the fixed price mentioned at Point a of this Clause. The payment shall be made under regulations of the Vietnam Securities Depository.

4. The delisting of warrants shall be effected under regulations of the Stock Exchange.

5. After each trading day, the Vietnam Securities Depository shall notify the Stock Exchange of the amount of warrants under which rights have been fully exercised for investors so that the Stock Exchange can make the delisting.

6. A warrant shall be suspended from trading in the following cases:

a/ The calculation of the underlying index of the warrant is suspended;

b/ The trading of the underlying security of the warrant is suspended;

c/ Aforce majeureevent, i.e. a natural disaster, fire or technical breakdown, occurs in the trading system or payment system;

d/ Cases in which the Stock Exchange considers the suspension is necessary to protect interests of investors and the suspension is approved by the State Securities Commission.

In case of an incident occurring in the payment system, the Vietnam Securities Depository shall report it to the State Securities Commission and at the same time send a notice to the Stock Exchange. The Stock Exchange shall report to the State Securities Commission right after a trading suspension decision is issued.

Article 10.Adjustment of warrants when there is a change in underlying securities

1. An issuer shall adjust the exercise price, conversion rate and other contents of its warrants under Clause 2, Article 4 of this Circular in the following cases:

a/ The price of the underlying securities is adjusted as the underlying securities issuer pays dividends or provides bonus stocks;

b/ Other cases as guided by the Stock Exchange.

2. In case an odd lot is formed due to the adjustment of a warrant, investors may request the issuer to redeem such odd lot at a price fixed under regulations of the Stock Exchange.

3. Cases and methods of adjustment of warrants shall be disclosed in the prospectus in accordance with regulations of the Stock Exchange.

Section 2

ACTIVITIES OF ISSUERS

Article 11.Market establishing activities of issuers

1. Issuers shall carry out market establishing activities in order to create liquidity for warrants they have issued. Market establishing transactions shall be made on dealing accounts of issuers under regulations of the Stock Exchange.

2. Warrants in dealing accounts of issuers which are used for market establishing activities may not be used for pledge, mortgage, payment of collateral, provision of loans or as security assets.

3. The Stock Exchange shall guide the rights and obligations of issuers when performing their market establishing function.

Article 12.Hedging activities of issuers

1. An issuer shall ensure that at least one staff member working at the warrant issuance-related risk management section possesses a chartered financial analyst (CFA) certificate or fund management practice certificate or CFA level II certificate.

2. An issuer shall ensure a sufficient amount of underlying securities to hedge risks for its outstanding warrants under a hedging plan mentioned at Point d, Clause 4, Article 4 of this Circular.

3. Hedging transactions shall be made on an independent trading account opened exclusively for hedging activities or on the dealing account of the issuer. The hedging activities of an issuer include selling, purchasing and borrowing transactions and other transactions conducted in accordance with law and the following regulations:

a/ Securities in hedging transactions include underlying securities and securities issued on the basis of such underlying securities in accordance with law. Securities used for the hedging purpose shall be frozen during the time warrants are exercised by the method of transferring underlying securities;

b/ Securities used for the hedging purpose may not be used for pledge, mortgage, payment of collateral, provision of loans or as security assets;

c/ The issuer shall manage and independently account the portfolios of hedging securities and satisfy the required hedging level under regulations of the Stock Exchange.

4. From the date of warrant listing, on a daily basis, an issuer shall report to the Stock Exchange on its hedging activities, including information on the actual hedging position and theoretical hedging position of each warrant under regulations of the Stock Exchange. The Stock Exchange may request the issuer to explain parameters used for calculating the theoretical hedging position if finding such parameters unreasonable.

The method of calculating the actual hedging position and theoretical hedging position of each offering must comply with the guidance of the State Securities Commission.

5. In case an issuer fails to comply with the hedging plan prescribed at Point d, Clause 4, Article 4 of this Circular, the Stock Exchange shall apply the following measures:

a/ To request the issuer to give explanations if the difference between the theoretical hedging position and the actual hedging position exceeds 20% for 3 consecutive working days in cases other than the case specified at Point b of this Clause. Within 3 working days after receiving the Stock Exchange’s request, the issuer shall perform the hedging to reduce the difference to 20% or under;

b/ To request the issuer to pay a money amount equivalent to the difference between the theoretical hedging position and the actual hedging position calculated at the market price in case such difference exceeds 50% for 3 consecutive working days. Within 3 working days after the Stock Exchange’s request, the issuer shall pay the requested money amount into its dealing account;

c/ To make a caution on the whole market if the issuer fails to perform the hedging at the Stock Exchange’s request under Point a of this Clause after the issuer has been requested to give explanations for three times or fails to make payment under Point b of this Clause.

The caution concerning a warrant shall be lifted if the issuer maintains the difference between the theoretical hedging position and actual hedging position at no more than 20% for 30 trading days or makes the payment under Point b of this Clause.

6. On a monthly basis, the Stock Exchange shall report to the State Securities Commission on the cases specified in Clause 5 of this Article. In case an issuer is cautioned under Point c, Clause 5 of this Article, the State Securities Commission may reduce the warrant issuance limit of the issuer under Clause 4, Article 3 of this Circular for the subsequent offering registration under regulations of the State Securities Commission.

Section 3

TRADING PAYMENT AND EXERCISE OF WARRANTS

Article 13.Warrant trading and trading payment by investors

1. Warrants shall be traded via the trading system of the Stock Exchange under regulations of the Stock Exchange. Investors shall place warrant trading orders on ordinary securities trading accounts. Securities companies may receive warrant buying or selling orders only from investors that acquire one hundred percent (100%) of money or warrants for trading in accordance with relevant regulations. Securities companies may not allowed investors to conduct margin trading of warrants.

2. Warrant trading payments shall be made under regulations of the Vietnam Securities Depository.

3. After completely making warrant purchase payments, investors will become warrant holders, while issuers shall perform obligations arising from warrants held by investors.

4. Issuers of underlying securities may neither invest nor trade in warrants based on their securities.

5. Foreign investors are not subject to any warrant holding limit.

6. Public funds may only invest in warrants for the hedging purpose.

Article 14.Exercise of warrants

1. Depending on the issuing conditions and types of underlying securities, issuers shall exercise warrants by either of the following methods:

a/ Transfer of underlying securities;

b/ Payment of money.

Money amounts shall be calculated on the basis of the payment price (payment index) of underlying securities and exercise price (exercise index). The Stock Exchange shall fix the payment price (payment index) as a basis for calculation of payable money amounts and announce such price on a daily basis for outstanding warrants.

2. The payment method shall be stated in the prospectus and issuance notice. The method of making money payments shall be applied in the following cases:

a/ Warrants are issued based on underlying securities being stock indexes;

b/ Warrants are exercised by the method of transfer of underlying securities to foreign investors, leading to an excess of the maximum level of foreign holding of underlying securities.

The issuer shall pay a money amount for the amount of underlying securities exceeding the holding limit for the reason that the method of transfer of underlying securities cannot be applied; and distribute underlying securities to investors in proportion to their warrant holding rates on the date of exercise;

c/ Warrants are exercised by the method of transfer of underlying securities to institutional securities traders, leading to an excess of the limit of holding of underlying securities by an institutional securities trader.

The issuer shall pay a money amount for the amount of underlying securities exceeding the holding limit for the reason that the method of transfer of underlying securities cannot be applied;

d/ Warrants are exercised by the method of transfer of underlying securities, making the investors subject to the provisions of the securities law on public bids.

The issuer shall pay a money amount for the amount of underlying securities exceeding the limit subject to public bids;

dd/ Under the agreement between investors and the issuer, the whole or part of the amount of warrants are exercised for the investors by the method of payment of money amounts for the reason that the method of transfer of underlying securities may make the investors subject to the provisions of the securities law on reporting on securities holding and disclosure of information by major shareholders, insiders and affiliated persons of insiders;

e/ Investors do not place orders for exercise of warrants and in-the-money warrants are automatically exercised by the method of payment of money amounts on the expiration date;

g/ In case warrants are exercised by the method of transfer of underlying securities, any arising odd part smaller than a stock unit shall be paid in cash.

3. Investors may only request the exercise of rights under in-the-money warrants available on their depository accounts on the date of exercise. Warrants in dealing accounts of securities companies issued by these securities companies may not be exercised.

4. Orders for exercise of warrants from trading accounts of investors opened at securities companies shall be transferred to issuers under regulations of the Stock Exchange, issuers and securities companies. An investor that places orders for exercise of warrants by the method of transfer of underlying securities shall carry out the procedures for transfer of money for exercise of bought warrants or transfer of securities for exercise of sold warrants in accordance with the regulations on securities trading and regulations of the Vietnam Securities Depository.

5. Based on written notices of issuers, the Vietnam Securities Depository shall make a list of warrant holders that request the daily exercise of rights under warrants to be exercised before the expiration date and a list of warrant holders on the expiration date, calculate and distribute money amounts or underlying securities by the payment method stated in the prospectus.

6. Assets to be used to pay to warrant holders include:

a/ Hedging assets and other assets on the dealing account;

b/ Credit assets on the margin account at the depository bank;

c/ Payment guarantee or other assets (if any);

In case assets are insufficient to pay for the exercise of warrants, interests of warrant holders shall be settled in accordance with relevant regulations applicable to partially secured creditors.

7. Within 5 working days after an investor places an order for exercise of warrants or after the expire date of warrants, a securities company, a depository member or an issuer shall coordinate with the Vietnam Securities Depository in paying money and transferring the underlying asset to the investor under regulations of the Vietnam Securities Depository.

Article 15.Special handling measures

1. Special handling measures shall be taken in the following cases:

a/ The issuer fails to exercise warrants under Article 14 of this Circular within 3 months from the due date of payment;

b/ The issuer is consolidated, merged or dissolved or goes bankrupt;

c/ Necessary cases as requested by the Stock Exchange.

2. Special handling measures include:

a/ For the case specified at Point a, Clause 1 of this Article, the issuer shall settle interests of warrant holders at their request. The issuer shall pay to investors an overdue interest at the prime interest rate announced by the State Bank for the overdue payment period counted from the due date of payment;

b/ For the case specified at Point b, Clause 1 of this Article, interests of warrant holders shall be settled in accordance with relevant regulations on consolidation, merger, dissolution and bankruptcy of businesses;

c/ For the case specified at Point c, Clause 1 of this Article, interests of warrant holders shall be settled with assets specified in Clause 6, Article 14 of this Circular.

3. Payments to be made to warrant holders under Clause 2 of this Article shall be determined on the basis of the amount and value of warrants, in which the value of warrants shall be calculated based on the closing price (or closing index) on the date of the event requiring payment or on the latest closing price or closing index before the date of the event (if the closing price or closing index on the date of the event requiring payment is unidentifiable) in accordance with relevant regulations.

Chapter III

ACTIVITIES OF SERVICE PROVIDERS

Article 16.Provisions on relevant activities of the Vietnam Securities Depository and Stock Exchange

1. The Vietnam Securities Depository has the following rights and responsibilities:

a/ To elaborate regulations guiding warrant trading registration, depository and payment; to develop and issue the process of warrant exercise after obtaining approval of the State Securities Commission;

b/ To coordinate with and provide the Stock Exchange with information on registration, depository and dealing activities of issuers and on exercise of warrants;

c/ To freeze securities used for the hedging purpose at the request of issuers upon the exercise of warrants;

d/ To promptly provide adequate and accurate information and send reports to the State Securities Commission as requested;

dd/ To provide other related services;

e/ To collect warrant-related service prices in accordance with law.

2. The Stock Exchange has the following rights and responsibilities:

a/ To develop and issue regulations guiding the listing, delisting, trading and market establishment after obtaining approval of the State Securities Commission; to promptly report to the State Securities Commission on transactions showing signs of market abuse or appearing to be ones banned by the securities law;

b/ To build, maintain and manage securities indexes as underlying securities of warrants;

c/ To develop and issue regulations on supervision of hedging activities of issuers, including violation-handling measures in case issuers fail to implement their hedging plans under this Circular;

d/ To develop and issue regulations guiding the disclosure of information by issuers, providers of related services and investors;

dd/ To coordinate with the Vietnam Securities Depository in supervising and sharing information on transactions of issuers and investors;

e/ To provide other services under contracts signed with the Vietnam Securities Depository and issuers;

g/ To carry out activities to stabilize the market and protect interests of investors according to its competence provided in the Law on Securities after obtaining approval of the State Securities Commission;

h/ To promptly provide adequate and accurate information and send reports to the State Securities Commission as requested;

i/ To collect warrant-related service prices in accordance with law.

Article 17.Activities of depository banks

1. Depository banks selected by issuers must fully satisfy the conditions prescribed in Clause 1, Article 98 of the Law on Securities.

2. Depository banks have the following rights and obligations:

a/ To keep payment security assets of issuers; to manage payment security assets specified in Article 5 separately from other assets of issuers and their own assets;

b/ To freeze payment security assets deposited as collaterals by issuers;

c/ To collect, spend, pay and transfer money related to activities of issuers at the lawful request of issuers, the State Securities Commission, Stock Exchange or Vietnam Securities Depository;

d/ To certify reports made by issuers on issues related to payment security assets;

dd/ To report to the State Securities Commission on violations of warrant issuers;

e/ To collect warrant-related service prices in accordance with law.

Chapter IV

PRODUCT INTRODUCTION INFORMATION, REPORTING AND INFORMATION DISCLOSURE

Article 18.Provisions on warrant product introduction information

1. A prospectus must contain all information relating to the warrant issuance, clearly stating rights of warrant holders, plan to secure the performance of obligations of the issuer toward warrant holders in special cases, and shall be updated when there is new information according to the form provided in Appendix 2 to this Circular.

2. A prospectus must be understandably presented and posted on the website of the issuer.

3. While the State Securities Commission examines its warrant offering registration dossier, an issuer may only use information in such dossier in an honest and accurate manner to probe the market, clearly expressing that the date of issuance and offering price are tentative.

4. Informative documents introducing warrants must have adequate, accurate and clear contents which must neither cause a misunderstanding that warrants generate stable income or secured profit nor make investors understand that the investment value always increases or is guaranteed.

5. Informative documents introducing warrants must warn investors about various risks of investment in warrants and clearly explain hedging plans.

6. Issuers and affiliated institutions and individuals shall take responsibility for the content and legality of information about their warrants.

Article 19.Obligation of issuers to report and disclose information

1. An issuer shall send to the State Securities Commission and Stock Exchange the following regular reports on warrants:

a/ Daily report on hedging activities and amount of warrants offered on the day, to be sent no later than 17:00 of the following working day;

b/ Monthly reports, to be sent within 10 days after the end of the month:

- Report on dealing transactions in underlying securities;

- Report on open position and present value of all warrants.

2. An issuer shall make an extraordinary information disclosure within 24 hours after it:

a/ Receives a warrant offering certificate;

b/ Receives a listing approval or listing change or delisting decision;

c/ Receives a written notice of warrant trading suspension, warrant offering cessation, cancellation of warrant offering cessation or termination of warrant offering;

d/ Adjusts warrants under Clause 1, Article 10 of this Circular;

dd/ No longer satisfies the conditions for warrant offering;

e/ Decides to change the depository bank or payment guarantee bank (if any) or receives a notice of dissolution, bankruptcy or special control of the depository bank in accordance with the banking law;

g/ Receives a request of the State Securities Commission or Stock Exchange where it lists warrants regarding an event which seriously impacts lawful interests of investors; or information relating to the company which greatly affects the warrant price and needs to be verified.

3. Issuers shall disclose information in the information-disclosing media in accordance with the regulations on disclosure of information on the securities market.

4. Issuers shall be exempted from the obligation of major shareholders to report and disclose information on their securities holdings for the hedging purpose calculated according to the theoretical hedging position.

Article 20.Obligation of investors to report and disclose information

1. When exercising warrants and becoming major shareholders of issuers of underlying securities, investors shall report and disclose information in the same manner as when they participate in stock trading in accordance with the regulations on reporting and information disclosure applicable to stock investors.

2. When exercising warrants to change the stock holding rate in issuers of underlying securities, major shareholders of such issuers shall report and disclose information in the same manner as when they participate in stock trading in accordance with the regulations on reporting and information disclosure applicable to major shareholders.

3. When participating in the trading of warrants based on underlying securities, insiders of issuers of such underlying securities and their affiliated persons shall report and disclose information in the same manner as when they participate in stock trading in accordance with the regulations on reporting and information disclosure applicable to insiders and their affiliated persons.

Article 21.Reporting obligation of depository banks

Within 10 days after the end of every month, a depository bank shall make a monthly supervision report on payment security assets of issuers according to the form provided in Appendix 5 to this Circular, and send it to the State Securities Commission and Stock Exchange. Supervision reports of depository banks must assess the compliance with regulations and provisions of prospectuses as follows:

a/ Compliance of issuers in margin activities;

b/ Violations (if any) of issuers and proposed solutions.

Chapter V

IMPLEMENTATION PROVISIONS

Article 22.Effect

1. This Circular takes effect on January 1, 2017.

2. The State Securities Commission shall report to the Ministry of Finance before promulgating professional processes and operation regulations mentioned in this Circular.

Article 23.Organization of implementation

1. The State Securities Commission, Stock Exchanges, Vietnam Securities Depository, securities companies, other related institutions and individuals shall implement this Circular.

2. Any amendments and supplementations to this Circular shall be decided by the Minister of Finance.-

For the Minister of Finance
Deputy Minister
TRAN XUAN HA

* All appendices to this Circular are not translated.