From February 15, total liabilities of a securities company must not exceed 05 times its equity capital

On December 31, 2020, the Ministry of Finance issues the Circular No. 121/2020/TT-BTC providing regulations on operation of securities companies.

Accordingly, a securities company shall manage separately money amounts deposited for securities trading of each client and separate money of its clients from its own money. A securities company may not directly receive and pay cash for securities transactions of its clients but shall make payments for such transactions via commercial banks. Besides, a securities company may not receive authorization from clients to transfer money internally among accounts of such clients.

Concurrently, the Ministry of Finance also prescribes 06 cases where a securities company may neither underwrite issuance under firm commitment nor act as the principal underwriter:

Firstly, the securities company 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.

Secondly, 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, etc.

Noticeably, the total liabilities of a securities company must not exceed 05 times its equity capital (this ratio is 03 times as provided in the previous regulations). The value of total liabilities under this provision is exclusive of the following amounts: Deposits of clients for securities trading; Reward and welfare fund; Provision for job loss allowances; Provision for damage compensations for investors.

This Circular takes effect on February 15, 2021.

For further details of the Circular 121/2020/TT-BTC, Click here