Circular No. 210/2012/TT-BTC dated November 30, 2012 of the Ministry of Finance guiding the establishment and operation of securities companies

THE MINISTRY OF FINANCE

Circular No. 210/2012/TT-BTC of November 30, 2012, guiding the establishment and operation of securities companies

Pursuant to the June 29, 2006 Securities Law;

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

Pursuant to the November 29, 2005 Enterprise Law;

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

Pursuant to Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

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

The Minister of Finance promulgates the Circular to guide the establishment and operation of securities companies.

Chapter I

GENERAL PROVISIONS

Article 1. Scope and subjects of regulation

1. Scope of regulation: This Circular provides the establishment and operation of securities companies in Vietnam.

2. Subjects of regulation:

a/ Securities companies;

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

Article 2. Interpretation of terms

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

1. Securities company means a business engaged in securities business, performing one, several or all of the following operations: securities brokerage, securities dealing, securities issuance underwriting and securities investment consultancy.

2. Securities practitioner means a person possessing a securities practice certificate, working in a securities brokerage, dealing, issuance underwriting or investment consultancy section of, and having signed a labor contract with, a securities company.

3. Valid copy means a copy notarized or certified by a competent Vietnamese organization.

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

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

6. Consolidation means that two or more securities companies of the same type (below referred to as consolidated securities companies) are consolidated into a new securities company (below referred to as consolidating securities company) by transferring all assets, rights, obligations and legitimate interests to the consolidating securities company and, at the same time, consolidated securities companies no longer exist.

7. Merger means that one or more securities companies of the same type (below referred to as merged securities companies) are merged into another securities company (below referred to as merging securities company) by transferring all assets, rights, obligations and legitimate interests to the merging securities company and, at the same time, merged securities companies no longer exist.

Chapter II

ESTABLISHMENT AND OPERATION LICENSES

Section 1

GRANT OF ESTABLISHMENT AND OPERATION LICENSES

Article 3. Conditions for grant of an establishment and operation license for a securities company

1. Having a working office and physical foundation to serve securities business activities as guided by the State Securities Commission after obtaining approval of the Ministry of Finance.

2. Having a paid-up charter capital at least equal to the legal capital level specified by law.

3. Having its director (general director) satisfying the criteria specified in Clause 3, Article 34 of this Circular.

4. Having at least three (3) securities practitioners for each business operation for which an operation license is applied for.

5. Structure of shareholders or equity capital contributors of a securities company:

a/ A securities company established as a joint-stock company or limited liability company with two or more members must have at least (2) institutional founding shareholders or members satisfying the conditions specified in Clause 7 of this Article, including at least one (1) institution being a commercial bank, an insurance business or a foreign institution as defined in Clause 8 of this Article;

b/ A securities company established as a single-member limited liability company must have its owner being a commercial bank or an insurance business as specified in Clause 7 of this Article or a foreign institution as defined in Clause 8 of this Article;

c/ The share holding rate or capital contribution portion of institutional founding shareholders or members must be at least 65% of the charter capital, of which institutions being commercial banks, insurance businesses or foreign institutions as defined in Clause 8 of this Article hold at least 30% of the charter capital of the securities company.

d/ Shareholders or members holding 10% or more of the equity capital or contributed capital of a securities company and their affiliated persons may not contribute capital representing more than 5% of the shares or contributed capital of another securities company;

e/ A securities company established and operating in Vietnam may not contribute capital to establish another securities company in Vietnam.

6. Conditions for an individual contributing capital to establish a securities company:

a/ Being a person not falling into the cases ineligible for establishing and managing businesses in Vietnam as prescribed by law and having the financial capability to contribute capital to establish a securities company;

b/ Using only his/her equity capital for contribution and not using loans or investment capital entrusted by other institutions and individuals;

c/ Proving his/her capability to contribute capital in Vietnam dong or a freely convertible foreign currency available on his/her bank account. The minimum monetary value must equal the capital amount he/she plans to contribute to the securities company and the time of bank certification must be within thirty (30) days before the date the dossier of application for establishment of a securities company is complete and valid.

7. Conditions for an institution contributing capital to establish a securities company:

a/ Having the legal entity status; neither being in the process of consolidation, merger, division, split-up, dissolution or bankruptcy nor falling into the cases ineligible for establishing and managing businesses as prescribed by law;

b/ Having profitable business operations for two (2) consecutive years prior to the year of capital contribution to establish a securities company, and having no accumulated losses by the time of capital contribution to establish a securities company;

c/ For a commercial bank, an insurance business or a securities company contributing capital:

- Not being in the state of operation control or special control or in another warning state;

- Satisfying all the conditions for making capital contribution or investment in accordance with specialized laws.

d/ For another economic organization contributing capital:

- Having operated for at least five (5) consecutive years prior to the year of capital contribution to establish a securities business institution;

- Having an equity capital, after subtracting long-term assets, at least equal to the capital amount it plans to contribute;

- Having a liquidity capital at least equal to the capital amount it plans to contribute.

e/ Only equity capital and capital of other lawful sources as defined by specialized laws may be used for contribution. Capital entrusted by other institutions and individuals may not be used for contribution.

8. A foreign institution contributing capital to establish a securities company must satisfy the following conditions:

a/ Being an institution operating in the banking, securities or insurance sector and having operated for at least two (2) consecutive years prior to the year of capital contribution;

b/ Being subject to constant and continuous supervision by a foreign specialized management or supervision agency in charge of securities and having obtained such agency’s written approval of capital contribution to establish a securities business institution in Vietnam;

c/ The foreign specialized management or supervision agency in charge of securities and the State Securities Commission have signed a bilateral or multilateral agreement on cooperation in information exchange, management, inspection and supervision of securities and securities market activities;

d/ Satisfying the relevant conditions specified in Clause 7 of this Article;

e/ Observing the provision of law on the rate of capital contribution by foreign institutions to establish securities companies.

Article 4. Dossiers of application for establishment and operation licenses

1. A dossier of application for an establishment and operation license for a securities company comprises:

a/ An application for an establishment and operation license (made according to the form provided in Appendix I to this Circular);

b/ A written description of the physical foundations to ensure the performance of securities business operations (made according to the form provided in Appendix II to this Circular) enclosed with documents evidencing the right to use the working office;

c/ The minutes of the meeting of founding shareholders or members and their decision on the establishment of a securities company. Such a decision must contain the following details:

- Name and business operations of the company;

- Charter capital and ownership structure;

- Adoption of the company charter and business plans;

- Representative(s) of founding shareholders or members to carry out procedures for establishing the securities company.

d/ A tentative list of the director (general director) and securities practitioners (made according to the form provided in Appendix III to this Circular) enclosed with valid copies of their securities practice certificates; and the resume of the director (general director) (made according to the form provided in Appendix IV to this Circular);

e/ A list of shareholders or capital-contributing members and their holding rates (made according to a form provided in Appendix V to this Circular);

f/ A tentative list of members of the Board of Directors, the Members’ Council and the Control Board (if any), enclosed with valid copies of their identity cards or valid passports, judicial record cards and the personal-information sheet (made according to the form provided in Appendix IV to this Circular);

g/ Documents proving the capital-contributing capability of shareholders or members contributing capital to establish the securities company:

- For an individual: A valid copy of the identity card or valid passport and the personal information sheet (made according to the form provided in Appendix IV to this Circular) and documents proving the financial capability satisfying the requirement prescribed in Clause 6, Article 3 of this Circular; judicial record card for a shareholder or member contributing ten per cent (10%) or more of the charter capital of the securities company;

- For an institution:

A valid copy of the establishment and operation license or business registration certificate or an equivalent document; company charter; minutes of the meeting and the decision of the Board of Directors, Members’ Council or Owner on the capital contribution and nomination of a representative of the contributed capital, enclosed with a valid copy of his/her identity card or valid passport, judicial record card and the personal information sheet (made according to the form provided in Appendix IV to this Circular) and other documents proving the compliance with the provisions of Clause 7, Article 3 of this Circular. In case the institution is expected to hold more than ten per cent (10%) of the charter capital of a securities company, it shall add the judicial record card of its at-law representative;

For a capital-contributing institution being the parent company, the financial statement must be the consolidated financial statement of the latest year which has been audited in accordance with the accounting and audit law;

For a capital-contributing institution being a commercial bank or an insurance business, valid copies of periodical reports on financial prudential and capital adequacy ratios prescribed by specialized laws for the latest two (2) years are additionally required;

h/ A written approval of the capital contribution to establish a securities company, granted by a specialized management or supervision agency, for commercial banks and insurance businesses, or another document proving the permission for capital contribution to establish a securities company;

i/ The draft company charter approved by founding shareholders or members of the securities company;

j/ A business operation plan for the first three (3) years suitable to business operation(s) for which the license is applied (made according to the form provided in Appendix VI to this Circular) enclosed with professional operation, internal control and risk administration processes.

2. In case a shareholder or member contributing capital to establish a securities company is a foreign institution, documents issued by the competent foreign management agency must be legalized by a consular office in the country where such institution has been registered within six (6) months before the date of dossier submission. Documents in foreign languages must be translated into Vietnamese by an organization with the function of translation and certified in accordance with Vietnamese law.

3. A dossier specified in Clauses 1 and 2 of this Article must be made in one (1) original set enclosed with an electronic file. The original dossier set may be submitted directly or sent by post to the State Securities Commission.

Article 5. Procedures for grant of establishment and operation licenses

1. Within twenty (20) working days after receiving a dossier specified in Article 4 of this Circular, the State Securities Commission shall request in writing supplementation in case the dossier is invalid, or request completion of the physical foundations and freezing of the contributed capital in case the dossier is complete and valid. When necessary to clarify matters related to the dossier, the State Securities Commission may request the representative of founding shareholders or members or the person expected to act as the director (general director) of the securities company to give verbal or written explanations.

2. Within thirty (30) days after the State Securities Commission makes a written request founding shareholders or members establishing the securities business institution shall complete the dossier of application for an establishment and operation license. Past this time limit, if shareholders or capital-contributing members fail to supplement and complete the dossier, the State Securities Commission may refuse to grant an establishment and operation license.

3. Within ninety (90) days after receiving a written notice from the State Securities Commission requesting completion of the physical foundations and freezing of the contributed capital, founding shareholders or members shall complete the physical foundations and freeze the contributed capital. The company’s charter capital must be frozen on the account at a commercial bank designated by the State Securities Commission and released and transferred to the account of the company right after it is granted an establishment and operation license. Past this time limit, the State Securities Commission may refuse to grant an establishment and operation license.

4. The State Securities Commission shall inspect the physical foundations at the working office of the securities company before granting an establishment and operation license.

5. Within seven (7) days after receiving a capital freezing certificate under Clause 3 of this Article and a written record of the result of inspection of the physical foundations of the company’s working office and other valid documents, the State Securities Commission shall grant an establishment and operation license to the securities company. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

6. The securities company shall commence its securities business operation within twelve (12) months after being granted an establishment and operation license.

Article 6. Names of securities companies

1. The name of a securities company must consist of the following elements:

a/ Type of business;

b/ The word “securities”; and,

c/ Proper name.

2. The names of securities companies must comply with the provisions of the Enterprise Law.

Article 7. Announcement of establishment and operation licenses

Within seven (7) days after being granted an establishment and operation license, a securities company shall announce it in accordance with Article 66 of the Securities Law.

Section 2

MODIFICATION OF ESTABLISHMENT AND OPERATION LICENSES

Article 8. Modification of establishment and operation licenses

1. When adding or withdrawing its securities business operations, changing its name, relocating its head office, increasing or decreasing its charter capital or changing its at-law representative, a securities company shall request the State Securities Commission to grant a modified establishment and operation license.

2. A dossier of request for modification of an establishment and operation license must be made in one (1) original set to be submitted directly or sent by post to the State Securities Commission.

3. In case the dossier of request for modification of its license is incomplete or invalid, a securities company shall supplement and complete the dossier within thirty (30) days after the State Securities Commission makes a written request. Past that time limit, the dossier already sent to the State Securities Commission is automatically invalidated.

4. When a securities company receives a modified establishment and operation license, it shall announce such license within the time limit and by the mode specified in Article 66 of the Securities Law.

Article 9. Addition of securities business operations

1. A securities company wishing to add a securities business operation must satisfy the following conditions:

a/ Having physical foundations satisfying the conditions specified in Clause 1, Article 3 of this Circular, in case of request for addition of the securities brokerage or dealing operation;

b/ Having a charter capital or equity capital at least equal to the legal capital prescribed for the licensed business operation(s) and business operation(s) to be added;

c/ Having a sufficient number of securities practitioners for the business operation(s) it is performing and at least three (3) securities practitioners for performing a business operation to be added;

d/ Not being placed under control or special control or suspended from operation under current regulations within three (3) months before the time of submission of the dossier of request for business operation addition.

2. A dossier of request for addition of a securities business operation comprises:

a/ A written request for modification of the establishment and operation license (made according to the form provided in Appendix VII to this Circular);

b/ A written description of the physical foundations to serve the business operation, in case of request for addition of the securities brokerage or dealing operation (made according to the form provided in Appendix II to this Circular);

c/ The decision of the Shareholders’ General Meeting, Members’ Council or Owner on the addition of securities business operation;

d/ An annual financial statement or the financial statement of the latest period (but not exceeding 6 months by the time of request for operation addition) which has been audited by an independent audit organization accredited by the State Securities Commission and a bank’s certification of an additional capital amount deposited at a frozen account (if any);

e/ A business operation plan for the first three (3) years for the business operation to be added (made according to the form provided in Appendix VI to this Circular) enclosed with professional operation, internal control and risk administration processes applicable to the securities business operation to be added;

f/ A list of securities practitioners currently working in the business operation sections of the company (made according to the form provided in Appendix III to this Circular); a list of securities practitioners expected to perform the added operation and valid copies of their securities practice certificates and labor contracts;

g/ The amended and supplemented charter approved by the Shareholders’ General Meeting, Members’ Council or Owner of the securities company.

3. The State Securities Commission shall inspect the physical foundations, in case of request for addition of the securities brokerage or dealing operation.

4. Within twenty (20) days after receiving a valid dossier specified in Clause 2 of this Article and the result of inspection of the physical foundations (if any), the State Securities Commission shall modify the establishment and operation license. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

Article 10. Withdrawal of securities business operations

1. Procedures for withdrawal of the securities brokerage operation of a securities company:

a/ The securities company shall submit a dossier of request for withdrawal of the securities brokerage operation which comprises the following documents:

- A written request for modification of the establishment and operation license of the securities company (made according to a form provided in Appendix VII to this Circular);

- The decision of the Shareholders’ General Meeting, Members’ Council or Owner on the withdrawal of the securities brokerage operation;

- A plan on settlement of clients’ accounts.

b/ The securities company implements the plan and process as guided by the State Securities Commission;

c/ Within seven (7) working days after receiving a report on the implementation of the plan on settlement of clients’ accounts, the State Securities Commission shall modify the establishment and operation license and concurrently issue a decision on the revocation of the securities depository registration certificate in case the securities company does not perform the securities dealing operation. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

2. Procedures for withdrawal of the securities investment consultancy, securities issuance underwriting or securities dealing operation:

a/ A dossier of request for withdrawal of the securities investment consultancy, securities issuance underwriting or securities dealing operation comprises the following documents:

- A written request for modification of the establishment and operation license of the securities company (made according to a form provided in Appendix VII to this Circular);

- The decision of the Shareholders’ General Meeting, Members’ Council or Owner on the withdrawal of the securities business operation;

- A report on results of settlement of contracts signed with clients, in case of withdrawal of the securities issuance underwriting or investment consultancy operation; or a plan on liquidation of the dealing account, in case of withdrawal of the securities dealing operation.

b/ Within seven (7) working days after receiving a complete and valid dossier specified at Point a, Clause 2 of this Article, the State Securities Commission shall modify the establishment and operation license for the securities company. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

Article 11. Renaming or relocation of head offices of securities companies

1. A dossier of request for renaming of a securities company:

a/ A written request for modification of the establishment and operation license of the securities company (made according to the form provided in Appendix VII to this Circular);

b/ The decision of the Shareholders’ General Meeting, Members’ Council or Owner of the securities company on its renaming;

c/ The amended and supplemented charter approved by the Shareholders’ General Meeting, Members’ Council or Owner of the securities company.

2. A dossier of request for relocation of the head office of a securities company comprises:

a/ A written request for modification of the establishment and operation license of the securities company (made according to the form provided in Appendix VII to this Circular);

b/ A written description of the physical foundations to serve the performance of business operations at the new location of the head office (made according to the form provided in Appendix II to this Circular) enclosed with documents evidencing the right to use the head office;

c/ The decision of Shareholders’ General Meeting, Members’ Council or Owner of the securities company on the relocation of its head office.

3. The new location to which the head office of a securities company will be moved must satisfy the conditions on physical foundations specified in Clause 1, Article 3 of this Circular.

4. Before approving the relocation of the head office of a securities company, the State Securities Commission shall inspect the physical foundations at the new location of the head office, for securities companies performing the securities brokerage or dealing operation.

5. Within twenty (20) days after receiving a complete and valid dossier and the result of inspection of the physical foundations (if any), the State Securities Commission shall modify the establishment and operation license. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

Article 12. Change of charter capital

1. A dossier of request for a change of charter capital comprises:

a/ A written request for modification of the establishment and operation license of the securities company (made according to the form provided in Appendix VII to this Circular);

b/ A certification of the increased capital amount by the bank where the frozen account is opened or a financial statement after the securities company completes the increase of its charter capital already audited by an audit organization accredited by the State Securities Commission; a financial statement audited after the securities company completes the redemption and invalidation of stocks or contributed capital amounts for reduction of the charter capital.

c/ A report on change in the ownership structure before and after the change of the charter capital; dossiers of shareholders or members contributing ten per cent (10%) or more of the charter capital as specified at Point d, Clause 2, Article 30 of this Circular and the decision of the Shareholders’ General Meeting, Members’ Council or Owner in case the purchaser is an institution;

d/ A report on the result of the share offering in accordance with law, in case of increase in the charter capital of a joint-stock company. A report on results of the redemption and invalidation of stocks or contributed capital amounts for reduction of the charter capital.

2. Within twenty (20) days after receiving a valid dossier specified in Clause 1 of this Article, the State Securities Commission shall modify the establishment and operation license. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

Article 13. Change of at-law representatives

1. A dossier of request for change of the at-law representative of a company comprises:

a/ A written request for modification of the establishment and operation license of the securities company (made according to the form provided in Appendix VII to this Circular);

b/ The decision of the Shareholders’ General Meeting, Members’ Council or Owner on the appointment of the Chairman of the Board of Directors or the Members’ Council or the Director (General Director) enclosed with his/her personal information sheet (made according to the form provided in Appendix IV to this Circular), valid copies of his/her identity card and securities practice certificate (if any);

c/ The amended and supplemented charter approved by the Shareholders’ General Meeting, Members’ Council or Owner, in case of change of the title of the at-law representative.

2. Within twenty (20) days after receiving a valid dossier specified in Clause 1 of this Article, the State Securities Commission shall modify the establishment and operation license. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

Section 3

SUSPENSION FROM OPERATION OR REVOCATION OF ESTABLISHMENT AND OPERATION LICENSES

Article 14. Suspension from operation of securities companies

1. A securities company’s operation is suspended in the following cases:

a/ Its dossier of application for grant or modification of an establishment and operation license contains intentionally falsified information;

b/ Upon the expiration of the warning time limit specified in Article 74 of the Securities Law, it still fails to redress the warned situation and has an accumulated loss equal to fifty per cent (50%) of its charter capital or no longer satisfies the condition on capital for securities business operations;

c/ It operates for improper purposes or at variance with the contents of its establishment and operation license;

d/ It fails to maintain the conditions for grant of establishment and operation license specified in Clauses 1, 2, 3 and 4, Article 3 of this Circular;

e/ Cases subject to suspension prescribed by the law on sanctioning of administrative violations in the field of securities and securities market.

2. The State Securities Commission shall base itself on the form and extent of violations of securities companies specified in Clause 1 of this Article to issue decisions on suspension of one, several or all securities brokerage, dealing, investment consultancy, issuance underwriting and depository operations, clearly stating the duration and scope of suspension.

3. In the duration of operation suspension, a securities company may neither open a new securities trading account nor sign new contracts nor extend existing contracts related to the suspended business operations; and shall liquidate and transfer accounts at the request of its clients (if any); and make a remedial plan and report on the implementation of such plan at the request of the State Securities Commission.

Article 15. Revocation of establishment and operation licenses

1. A securities company has its establishment and operation license revoked in the following cases:

a/ The cases specified at Points a, b and c, Clause 2, Article 70 of the Securities Law; the cases specified by the law on sanctioning of administrative violations in the field of securities and securities market; and the case of revocation specified in Clause 1, Article 46 of this Circular;

b/ Its operation duration stated in its charter expires or it requests ahead-of-time dissolution;

c/ It goes bankrupt.

2. Within thirty (30) days after the date a securities company is subject to compulsory revocation of its establishment and operation license in accordance with Clause 1 of this Article, the State Securities Commission shall issue a decision to terminate all licensed business activities of the securities company for carrying out the procedures for revoking its establishment and operation license.

3. After receiving the decision specified in Clause 2 of this Article, the securities company shall:

a/ Within 24 hours, disclose information on its website and at its business places, and notify the Stock Exchanges and the Vietnam Depository Center of the termination of all licensed business activities for carrying out the procedures for revoking its establishment and operation license;

b/ Fully terminate the performance of its licensed business operations and stop signing new contracts related to its business activities;

c/ Within fifteen (15) days, work out a plan on settlement of clients’ securities trading accounts opened at the company (if any). Such a plan must contain the following principal details:

- Time and method of disclosure of information and notification to each client of the withdrawal of the securities brokerage operation;

- Planned time of liquidation of trading accounts (account closure or transfer) at the request of clients. The time limit for liquidation is at least 30 days;

- Time of cessation of opening of new accounts;

- Planned time of cessation of transactions on the two Stock Exchanges;

- Time of cessation of withdrawal/payment transactions of clients;

- Planned time of closing clients’ existing account balances pending the liquidation;

- A plan on settlement of existing accounts and disputed accounts.

4. Within forty-five (45) days after the State Securities Commission gives its opinions on the plan on settlement of client accounts in accordance with Clause 3 of this Article, the securities company shall implement the plan in the following order:

a/ Disclosing information in the mass media and at its business places in accordance with regulations and notifying it to each client under the plan;

b/ Liquidating accounts (closing or transferring accounts), including money and securities at the request of clients;

c/ Past the time limit for account liquidation, making a list of all existing accounts (accounts not yet liquidated) enclosed with the money and securities balances of each existing account;

d/ Within five (5) working days after the expiration of the time limit for account liquidation, reporting on the account liquidation and existing accounts to the State Securities Commission;

e/ Reaching agreement on the transfer of existing securities trading accounts of its clients to other securities companies.

The State Securities Commission may designate another securities company as a substitute to complete transactions and contracts of the securities company having its establishment and operation license revoked. In this case, the authorization relationship is automatically established between the two companies.

5. Within five (5) working days after the completion of the account liquidation and transfer of existing accounts, the securities company shall report to the State Securities Commission on results of the account liquidation and transfer of existing securities trading accounts of clients. This provision is not applicable to securities companies that have completed the procedures for account liquidation (having no existing accounts) for their clients.

6. Within five (5) working days after receiving a report specified in Clause 4 or 5 of this Article, the State Securities Commission shall request in writing the securities company and related parties to carry out the procedures for dissolution or bankruptcy of the company in accordance with the Enterprise Law and the law on business bankruptcy. The State Securities Commission shall publish such written request on its website.

7. Within seven (7) working days after the completion of the dissolution or bankruptcy of a securities company, the at-law representative of the securities company shall send the company’s original establishment and operation license together with a dossier related to the company dissolution or bankruptcy to the State Securities Commission. Within seven (7) working days after receiving a complete and valid dossier, the State Securities Commission shall issue a decision to revoke the establishment and operation license and disclose information in accordance with regulations.

Chapter III

ORGANIZATION OF SECURITIES COMPANIES

Section 1

GENERAL PROVISIONS

Article 16. Principles of organization

1. Branches, transaction bureaus and representative offices are units affiliated to securities companies. Securities companies shall take responsibility for operations of their branches, transaction bureaus and representative offices.

2. The name of a branch, transaction bureau or representative office of a securities company must bear the name of such company followed by the word “branch”, “transaction bureau” or “representative office” and a proper name for differentiation.

Article 17. General procedures

1. The establishment, closure and relocation of branches, transaction bureaus and representative offices of securities companies are subject to approval of the State Securities Commission. Securities companies wishing to rename their branches and transaction bureaus or change professional operations or directors of their branches shall request the State Securities Commission to modify decisions on the establishment of such branches and transaction bureaus.

2. A dossier of request for approval of the State Securities Commission or a dossier of request for modification of the decision on the establishment of a branch or transaction bureau for the contents specified in Clause 1 of this Article must be made in one (1) original set to be sent directly or by post to the State Securities Commission.

3. In case the dossier is incomplete and invalid, the securities company shall supplement and complete it within thirty (30) days after the State Securities Commission requests in writing the dossier supplementation and completion. Past that time limit, if the securities company fails to supplement and complete the dossier sent to the State Securities Commission, such dossier is automatically invalided.

Section 2

BRANCHES OF SECURITIES COMPANIES

Article 18. Establishment of branches

1. Branches are units affiliated to securities companies. Branches of securities companies may perform business operations as decentralized or authorized by their securities companies. Business operations of branches are limited within the scope of business operations which securities companies are licensed to perform.

2. The establishment of a branch of a securities company must satisfy the following requirements:

a/ At the time of the branch establishment, the securities company is neither placed under control or special control nor suspended from operation under current regulations;

b/ The securities company is not sanctioned for an administrative violation in the field of securities and securities market within six (6) months before the State Securities Commission receives the dossier for branch establishment;

c/ The securities company has an office and necessary equipment for the branch to perform the authorized securities business operation(s);

d/ The director of the branch of the securities company must satisfy the criteria specified at Points a and d, Clause 3 of Article 34, have a securities practice certificate relevant to the business operation(s) to be performed by the branch, have at least two (2) years’ professional experience in finance, banking or securities and at least one (1) year’s management and executive experience;

e/ There are sufficient securities practitioners for business operation(s) currently performed at the head office, branch and transaction bureau, and at least two (2) appropriate securities practitioners for each business operation performed at the branch to be established.

3. A dossier of request for establishment of a branch comprises:

a/ A written request for establishment of a branch (made according to the form provided in Appendix IX to this Circular);

b/ The decision of the Board of Directors, Members’ Council or Owner of the securities company on the establishment of a branch and securities business operations authorized to the branch to perform;

c/ Professional operation, internal control and risk administration processes to be performed at the branch;

d/ A written description of the physical foundations for the performance of business operations authorized by the securities company (made according to the form provided in Appendix II to this Circular) enclosed with documents evidencing the right to use the branch office;

e/ A list of securities practitioners of the whole company; a list of the branch director and securities practitioners working at the branch enclosed with valid copies of the securities practice certificates of these securities practitioners and their labor contracts signed with the securities company; the decision on appointment and the personal information sheet (made according to a form provided in Appendix IV to this Circular) of the branch director.

4. The State Securities Commission shall inspect the physical foundations of the office of the securities company’s branch expected to perform the securities brokerage or dealing operation before issuing a decision to approve the establishment of the branch.

5. Within fifteen (15) days after receiving a complete and valid dossier and the result of inspection of the physical foundations (if any), the State Securities Commission shall issue a decision to approve the establishment of the branch. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

6. Branches of securities companies shall officially commence their operation within three (3) months after their establishment is approved by the State Securities Commission. Past this time limit, the State Securities Commission shall revoke its approval decision.

Article 19. Closure of branches

The closure of a branch shall be carried out in the following order:

1. The securities company submits a dossier of request for closure of a branch, which comprises:

a/ A written request for closure of a branch (made according to the form provided in Appendix IX to this Circular);

b/ The decision of the Board of Directors, Members’ Council or Owner of the securities company on the closure of the branch;

c/ A plan on settlement of valid securities trading contracts already signed with clients, including contracts on provision of brokerage, investment consultancy and issuance underwriting services, clearly stating the disclosure of information and notification to clients of the closure and the time limit for clients to liquidate their accounts which is at least fifteen (15) days.

2. Within fifteen (15) days after receiving a valid dossier specified in Clause 1 of this Article, the State Securities Commission shall issue a decision to approve the closure of the branch of the securities company. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

3. The securities company shall close its branch under the plan reported to the State Securities Commission.

4. The securities company shall report on the result of the branch closure. Within five (5) days after receiving a report, the State Securities Commission shall issue a decision to revoke the decision on establishment of the branch of the securities company.

Article 20. Relocation or modification of decisions on establishment of branches

1. A dossier of request for relocation of a branch comprises:

a/ A written request for relocation of the branch (made according to a form provided in Appendix IX to this Circular);

b/ A written description of the physical foundation for the performance of business operations at the new location of the branch (made according to the form provided in Appendix II to this Circular) enclosed with documents evidencing the right to use the branch office;

c/ The decision of the Board of Directors, Members’ Council or Owner on the relocation of the branch.

2. A dossier of request for addition of securities business operation(s) of a branch comprises:

a/ A written request for modification of the decision to approve the establishment of a branch of the securities company (made according to a form provided in Appendix X to this Circular);

b/ A written description of the physical foundations for the performance of business operations to be added, in case of addition of the securities brokerage or dealing operation (made according to the form provided in Appendix II to this Circular);

c/ The decision of the Board of Directors, Members’ Council or Owner of the securities company on the addition of business operation(s) of the branch;

d/ A list of securities practitioners working in the professional sections of the company, branches and transaction bureaus, and a list of securities practitioners expected to perform the business operation(s) to be added at the branch enclosed with valid copies of the securities practice certificates of these practitioners and their labor contracts signed with the securities company.

3. A dossier of request for withdrawal of securities business operation(s) of a branch comprises:

a/ A written request for modification of the decision to approve the establishment of a branch of a securities company (made according to the form provided in Appendix X to this Circular);

b/ The decision of the Board of Directors, Members’ Council or Owner of the securities company on the withdrawal of business operation(s) of the branch;

c/ A plan on settlement of valid contracts already signed with clients, including contracts on opening of securities trading accounts, securities investment consultancy and issuance underwriting, clearly stating the disclosure of information and notification to clients of the closure of the branch and a time limit for clients to liquidate their accounts which is at least fifteen (15) days.

4. A dossier of request for renaming of a branch comprises:

a/ A written request for modification of the decision to approve the establishment of a branch of the securities company (made according to a form provided in Appendix X to this Circular);

b/ The decision of the Board of Directors, Members’ Council or Owner of the securities company on the renaming of the branch.

5. A dossier of request for change of a branch director comprises:

a/ A written request for modification of the decision to approve the establishment of a branch of the securities company (made according to the form provided in Appendix X to this Circular);

b/ The decision of the Board of Directors, Members’ Council or Owner of the securities company on the change of the branch director;

c/ The personal information sheet of the branch director (made according to the form provided in Appendix IV to this Circular) enclosed with valid copies of his/her identity card, labor contract and securities practice certificate relevant to the business operation(s) the branch is authorized to perform.

6. Securities companies that relocate their branches shall satisfy the physical foundation conditions specified at Point c, Clause 2, Article 18 of this Circular. Before approving the relocation of a branch, the State Securities Commission shall inspect the physical foundations at the new location of the branch, for branches performing the securities brokerage or dealing operation.

7. Within fifteen (15) days after receiving a complete and valid dossier and the result of inspection of the physical foundations, in case of addition of operations or relocation of a branch (if any), the State Securities Commission shall decide to modify the decision to approve the establishment of the branch. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

Section 3

TRANSACTION BUREAUS OF SECURITIES COMPANIES

Article 21. Establishment of transaction bureaus

1. Transaction bureaus are units affiliated to the head offices or branches of securities companies. A transaction bureau must be located within the province or city where the securities company locates its heads office or branch. Transaction bureaus assist the performance of securities brokerage, investment consultancy and depository services by the head office or branch to which these transaction bureaus are affiliated.

2. The establishment of a transaction bureau of a securities company must satisfy the following requirements:

a/ At the time of establishment of the transaction bureau, the securities company is neither placed under control or special control nor suspended from operation under current regulations;

b/ The securities company is not sanctioned for an administrative violation in the field of securities and securities market within six (6) months before the State Securities Commission receives the dossier of request for transaction bureau establishment;

c/ The securities company has an office and necessary equipment for the transaction bureau to assist the performance of securities business operations;

d/ There are sufficient securities practitioners working at the head office, branch and transaction bureau, and at least two (2) securities practitioners to work at the to be-established transaction bureau.

3. A dossier of request for establishment of a transaction bureau comprises:

a/ A written request for establishment of a transaction bureau (made according to the form provided in Appendix IX to this Circular);

b/ Professional processes to be performed at the transaction bureau;

c/ A written description of the physical foundations for the transaction bureau to assist business operations (made according to the form provided in Appendix II to this Circular) enclosed with documents evidencing the right to use the transaction bureau office;

d/ The decision of the Board of Directors, Members’ Council or Owner of the securities company on the establishment of a transaction bureau;

e/ A list of securities practitioners of the whole company; a list of securities practitioners working at the transaction bureau enclosed with valid copies of their securities practice certificates and labor contracts signed with the securities company.

4. The State Securities Commission shall inspect the physical foundations of the transaction bureau of the securities company before issuing a decision to approve the establishment of the transaction bureau.

5. Within fifteen (15) days after receiving a complete and valid dossier and the result of inspection of the physical foundations (if any), the State Securities Commission shall issue a decision to approve the establishment of the transaction bureau. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

6. Transaction bureaus of securities companies shall officially commence their operation within three (3) months after their establishment is approved by the State Securities Commission. Past this time limit, the State Securities Commission shall revoke its approval decision.

Article 22. Closure of transaction bureaus

1. A dossier of request for closure of a transaction bureau comprises:

a/ A written request for closure of the transaction bureau (made according to the form provided in Appendix IX to this Circular);

b/ The decision of the Board of Directors, Members’ Council or Owner of the securities company on the closure of the transaction bureau;

c/ A plan on settlement of valid securities trading contracts already signed with clients, clearly stating the disclosure of information and notification to clients of the closure of the transaction bureau and time limit for clients to liquidate their accounts which is at least fifteen (15) days.

2. Within fifteen (15) days after receiving a valid dossier specified in Clause 1 of this Article, the State Securities Commission shall issue a decision to approve the closure of a transaction bureau of the securities company. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

3. The securities company shall close its transaction bureau under the plan reported to the State Securities Commission.

4. The securities company shall report on the result of the transaction bureau closure. Within five (5) days after receiving a report, the State Securities Commission shall decide to revoke the decision on the establishment of the transaction bureau of the securities company.

Article 23. Relocation or modification of decisions to approve the establishment of transaction bureaus

1. A dossier of request for relocation of a transaction bureau comprises:

a/ A written request for relocation of a transaction bureau of the securities company (made according to the form provided in Appendix IX to this Circular);

b/ A written description of the physical foundations at the new location of the transaction bureau for the assistance of business operations (made according to the form provided in Appendix II to this Circular) enclosed with documents evidencing the right to use the transaction bureau;

c/ The decision of the Board of Directors, Members’ Council or Owner on relocation of the transaction bureau.

2. A dossier of request for renaming of a transaction bureau comprises:

a/ A written request for modification of the decision to approve the establishment of a transaction bureau of the securities company (made according to the form provided in Appendix X to this Circular);

b/ The decision of the Board of Directors, Members’ Council or Owner of the securities company on the renaming of the transaction bureau.

3. Securities companies relocating their transaction bureaus shall satisfy the physical foundation conditions specified at Point c, Clause 2, Article 21 of this Circular. The State Securities Commission shall inspect the physical foundations at new locations of transaction bureaus.

4. Within fifteen (15) days after receiving a complete and valid dossier and the result of inspection of the physical foundations, the State Securities Commission shall decide to modify the decision to approve the establishment of the transaction bureau. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

Section 4

REPRESENTATIVE OFFICES OF SECURITIES COMPANIES

Article 24. Establishment of representative offices

1. Representative offices are unit affiliated to securities companies. A representative office must be located within the province or city where the securities company locates its head office or branch.

2. The scope of operation of a representative office covers one, several or all of the following activities:

a/ Performing the liaison and market research functions;

b/ Promoting the formulation of projects on cooperation in the field of securities and securities market in the locality where it is located;

c/ Stepping up and supervising the implementation of projects and signed contracts related to its field of operation.

3. Representative offices may neither conduct business activities and activities related to securities transactions nor directly or indirectly sign economic contracts.

4. The establishment of a representative office of a securities company must satisfy the following requirements:

a/ At the time of establishment of the transaction bureau, the securities company is neither placed under control or special control nor suspended from operation under current regulations;

b/ The securities company is not sanctioned for an administrative violation in the field of securities and securities market within six (6) months before the State Securities Commission receives the dossier of request for representative office establishment ;

c/ The securities company has a location for the representative office.

5. A dossier of request for establishment of a representative office comprises:

a/ A written request for establishment of a representative office (made according to the form provided in Appendix IX to this Circular);

b/ The decision of the Board of Directors, Members’ Council or Owner of the securities company on the establishment of a representative office, clearly stating the scope of operation of the representative office;

c/ Documents evidencing the right to use the office of the representative office.

6. Within fifteen (15) days after receiving a valid dossier, the State Securities Commission shall issue a decision to approve the representative office establishment. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

Article 25. Closure of representative offices

1. A representative office of a securities company is closed in the following cases:

a/ It voluntarily terminates its operation;

b/ The locality in which the representative office is expected to be located already has the head office or a branch of the securities company.

2. A dossier of request for closure of a representative office comprises:

a/ A written request for closure of the representative office (made according to the form provided in Appendix IX to this Circular);

b/ The decision of the Board of Directors, Members’ Council or Owner of the securities company on the closure of the representative office.

3. Within fifteen (15) days after receiving a valid dossier specified in Clause 2 of this Article, the State Securities Commission shall issue a decision to approve the closure of the representative office and revoke its establishment decision. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

Article 26. Relocation or modification of decisions to approve the establishment of representative offices

1. A dossier of request for relocation of a representative office comprises:

a/ A written request for relocation of a representative office of the securities company (made according to the form provided in Appendix IX to this Circular);

b/ The decision of the Board of Directors, Members’ Council or Owner on the relocation of the representative office;

c/ Documents evidencing the right to use the location of the representative office.

2. A dossier of request for renaming of a representative office comprises:

a/ A written request for modification of the decision to approve the establishment of a representative office of the securities company (made according to the form provided in Appendix X to this Circular);

b/ The decision of the Board of Directors, Members’ Council or Owner of the securities company on the renaming of the representative office.

3. Within fifteen (15) days after receiving a valid dossier, the State Securities Commission shall decide to modify the decision to approve the establishment of representative office. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

Chapter IV

GOVERNANCE AND MANAGEMENT OF SECURITIES COMPANIES

Article 27. Principles of governance and management

1. Securities companies shall comply with the Securities Law, the Enterprise Law and other relevant laws on corporate governance. Securities companies shall issue their charters consistent with the model charter provided in Appendix XI to this Circular.

2. Securities companies must be honest toward their clients and may not infringe upon the assets, rights and other legitimate interests of their clients.

3. 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 Securities Law, Enterprise Law and other relevant laws.

4. 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.

Article 28. Governance apparatus of securities companies

1. The governance apparatus of a securities joint-stock company consists of the Shareholders’ General Meeting, Board of Directors, Control Board and Directorate.

2. The governance apparatus of a securities single-member limited liability company or a securities limited liability company with two or more members consists of the Members’ Council, Control Board and Directorate.

3. The Chairman of the Board of Directors, Chairman of the Members’ Council or Director (General Director) of a securities company is the at-law representative of the company as prescribed the company charter.

Article 29. Shareholders and members

1. Founding shareholders or members of a securities company may not transfer their shares or initially contributed capital amounts within three (3) years from the date of grant of the establishment and operation license, unless they transfer such shares or contributed capital amounts among them. Within that time limit, commercial banks, insurance businesses or foreign institutions defined in Clauses 7 and 8, Article 3 of this Circular shall constantly hold at least thirty per cent (30%) of the charter capital of the securities company.

2. Shareholders and members that hold ten per cent (10%) or more of the equity capital or contributed capital of a securities company and their affiliated persons may not hold more than five per cent (5%) of the total shares or contributed capital of another securities company.

3. Shareholders and members that hold ten per cent (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.

4. Shareholders and members that hold ten per cent (10%) or more of the charter capital of a securities company shall fully notify the securities company within twenty four (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, merger, division, split up, dissolution or bankruptcy of the company.

5. A securities company shall report to the State Securities Commission on the cases specified in Clause 4 of this Article within five (5) days after receiving notices from its shareholders or members.

Article 30. Transactions that change the holding of shares or contributed capital portions representing 10% or more of the paid-up charter capital of securities companies

1. A transaction of transferring shares or contributed capital portions that enables the transferee to become a shareholder or capital-contributing member holding ten percent (10%) or more of the paid-up charter capital of a securities company is subject to approval by the State Securities Commission, except for stocks of securities companies already listed or registered for trading at a Stock Exchange and the case of transfer under a court ruling.

2. A dossier of request for approval of a transaction comprises:

a/ A written request for transfer of shares or contributed capital portions (made according to the form provided in Appendix XII to this Circular);

b/ A valid copy of the transfer request between the parties;

c/ An on-principle transfer contract agreed upon by the transferor and the transferee;

d/ The personal information sheet of the new shareholder (made according to the form provided in Appendix IV to this Circular) enclosed with a valid copy of his/her identity card, for individual shareholders, or a copy of its business registration certificate, for institutional shareholders.

e/ The decisions of the Boards of Directors, Members’ Councils or Owners of the transferor and the transferee in case they are institutions;

f/ A written certification by the securities company of the validity of the transfer.

g/ In case the transaction that changes the holding of shares or contributed capital portions involves foreign elements, relevant documents in a foreign language must be translated into Vietnamese by an organization with the translation function in accordance with the Vietnamese law and their Vietnamese translations must be authenticated. Documents issued by competent foreign agencies must be consularly legalized in accordance with relevant laws.

3. A dossier of request for approval of a transaction must be made in one (1) original set to be directly submitted or sent by post to the State Securities Commission.

4. Within fifteen (15) days after receiving a valid dossier, the State Securities Commission shall issue a written approval of the transaction. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

5. Involved parties shall complete procedures for the approved transaction within ninety (90) days after the written approval of the State Securities Commission takes effect. In case of failure to complete the transaction within the above time limit, the written approval of the State Securities Commission is automatically invalidated.

6. Within five (5) days after the transfer transaction is completed, the securities company shall send to the State Securities Commission a report on its results, made according the form provided in Appendix XIII to this Circular.

Article 31. Shareholders’ General Meeting and Members’ Council

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 four (4) months after the end of a fiscal year. In case it is unable to do so, it shall report in writing to the State Securities Commission, clearly stating the reason and convene such an annual meeting within two (2) subsequent months.

3. A securities company shall send a report on results of a meeting of the Shareholders’ General Meeting or Members’ Council enclosed with relevant documents to the State Securities Commission within five (5) working days after such meeting concludes.

Article 32. 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 director (general director) of another securities company.

2. The functions and tasks of, and jobs authorized to, the Board of Directors or Members’ Council must be specifically defined.

3. The functions and tasks of each member of the Board of Directors or Members’ Council must be clearly defined.

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

5. The Board of Directors or Members’ Council shall set up units or appoint persons to take charge of risk management in accordance with Clause 1, Article 35 of this Circular and internal control in accordance with Clause 1, Article 36 of this Circular.

Article 33. Control Board

1. 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.

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

3. A Control Board which consists of two (2) members or more shall meet at least twice (2) 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.

4. When detecting a member of the Board of Directors, Members’ Council or Directorate who commits a violation of law or the company 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 seven (7) working days after detecting it.

Article 34. Directorate

1. The Director (General Director) shall manage daily business activities of the securities company, submit to supervision by the Board of Directors or Members’ Council, and take responsibility before the Board of Directors or Members’ Council and law for the exercise of his/her rights and performance of his/her tasks.

2. The Director (General Director) and Deputy Directors (Deputy General Directors) of a securities company may not concurrently work for another securities company, fund management company or business; the Director (General Director) of a securities company may not act as a member of the Board of Directors or Members’ Council of another securities company.

3. The Director (General Director) of a securities company must satisfy the following criteria:

a/ Neither having been nor being examined for penal liability, sentenced to imprisonment or deprived of the right to practice his/her profession by the court in accordance with law;

b/ Having at least three (3) years’ professional experience in finance, banking or insurance and at least three (3) years’ experience in governance and management;

c/ Possessing a financial analysis or fund management practice certificate;

d/ Having not been sanctioned by the State Securities Commission under the law on securities and securities market for the latest two (2) years.

4. Deputy Directors (Deputy General Directors) in charge of professional operation sections must satisfy the criteria specified at Points a and d, Clause 3 of this Article, possess securities practice certificates relevant to operations they are in charge of, and have at least two (2) years’ professional experience in finance, banking or insurance and at least two (w) years’ experience in governance and management.

5. A securities company shall elaborate a working regulation of its Directorate which must be approved by its Board of Directors or Members’ Council. A working regulation must have the following principal contents:

a/ Specific responsibilities and tasks of members of the Directorate;

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

c/ Responsibility of the Directorate to report to the Board of Directors, Members Council and Control Board.

Article 35. Risk management

1. In the risk management, the Board of Directors or Members’ Council of a securities company has the following functions and tasks:

a/ To formulate policies and strategies for risk management in activities of the company;

b/ To examine and assess the appropriateness and effectiveness of the risk management system set up in the company.

2. The Directorate shall set up and maintain the risk management system to prevent risks which might affect the interests of the company and its clients. The risk management system shall perform the following tasks:

a/ Formulating policies on risk management;

b/ Identifying the risk level acceptable to the company;

c/ Identifying risks of the company;

d/ Measuring risks;

e/ Monitoring, preventing, detecting and handling risks;

f/ Reporting on risk management.

3. The State Securities Commission shall guide the risk management system of securities companies.

Article 36. Internal audit

1. Securities companies being joint-stock public companies or companies licensed to perform the securities brokerage operation shall set up an internal audit section attached to the Board of Directors (Members’ Council). The internal audit section has the following functions and tasks:

a/ To independently assess the appropriateness and compliance of policies, laws, the company 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 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;

e/ To assess the compliance with law and control measures to assure safety of assets;

f/ 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;

j/ To control the information technology system;

k/ To investigate violations within the securities company;

l/ To conduct internal audit of the securities company and its affiliated companies.

2. 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 securities 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 information received and may not disclose information without valid authorization, unless they are obliged to do so by law and internal regulations of the company.

3. Personnel requirements of the internal audit section

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 five (5) 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 Director (General Director), Deputy Director (Deputy General Directors) 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 37. Internal control

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

2. The internal control section under the Directorate is tasked to control compliance with the following contents:

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;

e/ Separation of assets of clients from those of the company;

f/ Preservation and storage of assets of clients;

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

h/ Other tasks as assigned by the Director (General Director).

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 Securities Law 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/ The head of this section must have professional qualifications in law, accounting and audit; and is adequately experienced, prestigious and competent to effectively perform his/her assigned tasks;

b/ Persons working in this section are not affiliated to heads of other specialized sections, operation performers, Director (General Director), Deputy Directors (Deputy General Directors) and directors of branches of the securities company.

c/ 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;

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

Article 38. Management of securities practitioners

1. Unless he/she is appointed as a contributed capital representative or a member of the company management board of the institution owning the securities company or of an institution in which the securities company invests, a securities practitioner may not:

a/ Concurrently work for another institution having ownership relationship with the securities company where he/she is working;

b/ Concurrently work for another securities company or fund management company;

c/ Concurrently act as the Director (General Director) of an institution publicly offering securities to the public or a listed institution.

2. A securities practitioner who is currently working for a securities company may only open a securities trading account for himself/herself (if any) at such securities company. This provision is not applicable to securities practitioners working for securities companies that are not members of the stock exchange.

3. Securities practitioners shall represent their securities companies in conducting transactions with clients and securities companies shall take responsibility for all activities of their securities practitioners in performing their business operations. Securities practitioners may not use money and securities on their clients’ accounts without being authorized by their securities companies under the written entrustments of clients to the securities companies.

4. Securities practitioners shall participate in compulsory training courses on legal documents, trading systems and new securities types organized by the State Securities Commission or stock exchanges.

Chapter V

FINANCIAL SAFETY MANAGEMENT

Article 39. Charter capital increase or reduction

1. Charter capital increase

a/ A securities company may not increase its charter capital before officially conducting securities business activities;

b/ A securities company being a limited liability company may increase its charter capital by the modes provided in the Enterprise Law. Before increasing its charter capital, a securities company shall report to the State Securities Company. A report dossier comprises:

- A notice of charter capital increase;

- The decision of the Members’ Council or Owner on the capital increase and a capital raising plan approved by the Members’ Council or Owner of the securities company;

- A list of new capital-contributing members and members contributing ten per cent (10%) or more of the charter capital of the securities company, enclosed with the documents specified at Point d, Clause 2, Article 30 of this Circular.

c/ A securities company being a joint-stock company may increase its charter capital by the following modes:

- Issuance of new stocks to increase the charter capital in accordance with relevant laws, including conversion of debts into capital contributions under agreements between creditors and the securities company;

- Conversion of issued bonds into shares in accordance with law;

- Carrying forward of share premiums, retained profits and other lawful amounts for charter capital increase. The securities company may use share premiums due to the difference between the sale price and the cost of buying treasury stocks to increase its charter capital after selling out such treasury stocks. The securities company may use share premiums due to the difference between the sale price and the par value of issued stocks to increase its charter capital after one year from the end of the issuance of these stocks.

d/ Before increasing its charter capital by the modes of conversion of bonds and carrying forward of lawful amounts specified at Point c, Clause 1 of this Article, a securities company shall register the increase with the State Securities Commission. Registration documents include:

- In case of conversion of bonds into shares: The decision of the Shareholders’ General Meeting approving the issuance plan enclosed with the plan on conversion of bonds into shares approved by the Shareholders’ General Meeting;

- In case of carrying forward of lawful amounts for charter capital increase: The decision of the Shareholders’ General Meeting approving the issuance plan; the latest audited financial statement and other necessary documents evidencing lawful capital sources used for charter capital increase.

2. Charter capital reduction

a/ A securities company being a single-member limited liability company may not reduce its charter capital;

b/ A securities company being a limited liability company with two or more members or a joint-stock company may redeem its shares or contributed capital amounts of its shareholders or members to reduce its charter capital. After being redeemed for charter capital reduction, shares or contributed capital amounts of its shareholders or members must be immediately destroyed;

c/ Conditions for a securities company to redeem its shares or contributed capital amounts to reduce its charter capital include:

- It has operated for at least three (3) years since the date of grant of its establishment and operation license;

- Its Shareholders’ General Meeting or Members’ Council has approved the reduction of the charter capital and the reduction plan;

- Its latest audited financial statement shows a sufficient capital amount for redemption of stocks or contributed capital from the following sources: share premiums or the development investment fund or undistributed after-tax profits or another equity capital source as provided by law;

- Its creditors approve the charter capital reduction, if by the time of reduction it has the obligation to pay debts;

- After the charter capital reduction, it shall guarantee payment of all debts and fulfillment of other property obligations and ensure sufficient legal capital for its licensed securities business operations in accordance with current regulations, and the percentage of liquidity capital after the redemption reach at least 180%.

d/ Before reducing its charter capital, a securities company shall report to the State Securities Commission. Such a report dossier comprises:

- A notice of charter capital reduction;

- The decision of the Members’ Council or Shareholders’ General Meeting on the reduction of charter capital and the reduction plan approved by the Members’ Council or Shareholders’ General Meeting of the securities company;

- The financial statement audited by an audit organization approved by the State Securities Commission for the period closest to the time of the decision of charter capital reduction;

- Opinions of creditors on the capital reduction certified by an independent audit organization approved by the State Securities Commission;

- The commitment of members of the Board of Directors or Members’ Council to assure payment of all debts and fulfillment of other property obligations after the charter capital reduction.

3. Within fifteen (15) days after receiving valid documents on the charter capital increase or reduction as prescribed in Clause 1 or 2 of this Article, the State Securities Commission shall reply in writing to the securities company on the charter capital increase or reduction.

4. After completing the charter capital increase or redemption of stocks or contributed capital amounts for capital reduction, the securities company shall carry out the procedures for adjustment of its establishment and operation license in accordance with Article 12 of this Circular.

Article 40. Financial safety ratios               

1. Securities companies shall assure financial safety ratios in accordance with regulations of the Ministry of Finance.

2. Reports on liquidity capital ratio made on June 30 every year must be examined while those made on December 31 every year must be audited by independent audit organizations approved by the State Securities Commission.

3. The State Securities Commission shall disclose on its website information on securities companies placed under control or special control and other relevant information to protect investors within twenty four (24) hours after deciding to place such securities companies under control or special control.

Article 41. Treasury stocks

1. Except the case of purchase of odd-lot stocks at the request of clients or for error correction in accordance with regulations of the Vietnam Securities Depository, a securities company being a joint-stock company may redeem no more than ten per cent (10%) of common shares it has issued as treasury stocks.

2. Securities companies may only use retained profits, share premiums and other sources (excluding financial provisions) as defined by law to purchase treasury stocks. After purchasing treasury stocks, a securities company shall assure that its equity capital is at least equal to the legal capital prescribed by law.

The above provisions must be implemented according to financial statements or consolidated financial statements (for securities companies being parent companies) audited within six months before the expected time of purchase of treasury stocks.

3. The purchase or sale of treasury stocks of a securities company must be approved by its Board of Directors.

4. A securities company may only sell treasury stocks after six (6) months from the end of the latest purchase of treasury stocks, unless these treasury stocks are distributed to its employees or used as bonus stocks. The use of these treasury stocks as bonus stocks for employees must be approved by the Shareholders’ General Meeting and the company must assure sufficient reciprocal source from its equity capital.

5. A securities company that purchases or sells treasury stocks shall work out a treasury stock purchase or sale plan, clearly stating the time of purchase or sale and principle of pricing, and shall report it in writing to the State Securities Commission and concurrently disclose information within seven (7) days before purchasing or selling treasury stocks. Such a report and information disclosure must contain the following details:

a/ Purpose of treasury stock purchase or sale;

b/ Maximum volume of stocks to be purchased or sold;

c/ Capital source for purchase;

d/ Principle of pricing;

e/ Time of transaction;

f/ Projected price.

6. Within ten (10) days after the completion of a transaction of treasury stock purchase or sale, a securities company shall report to the State Securities Commission and disclose information, clearly stating the reason if it cannot fully purchase or sell out the projected volume of treasury stocks.

7. A securities company may not purchase treasury stocks in the following cases:

a/ It has overdue debts;

b/ It is conducting a stock offering to raise more capital;

c/ It is conducting a stock split or reverse split;

d/ It is selling treasury stocks;

e/ Its stocks are subject to public bids.

8. A securities company shall complete the purchase or sale of treasury stocks within the announced time limit which must not exceed ninety (90) days after the transaction is commenced.

9. A securities company may not purchase the following stocks for use as treasury stocks:

a/ Stocks of its major shareholders or managers and their affiliated persons in accordance with the Securities Law, unless its stocks have been listed on the Stock Exchange;

b/ Its shares are subject to transfer restriction as prescribed by law and the company charter.

10. In case a securities company sells preferred treasury stocks to the subjects defined at Point a, Clause 9 of this Article, it must obtain approval of the Shareholders’ General Meeting and parties with related interests are not allowed to vote.

11. A securities company may not change and shall implement the reported and disclosed treasury stock purchase or sale plan. In case it fails do so, it shall explain in writing the reason to the State Securities Commission and disclose information in accordance with regulations.

12. In case of sale of treasury stocks in the form of public offering, a securities company shall comply with regulations on public offering of securities.

Article 42. Borrowing limitations

1. Total liabilities of a securities company must not exceed three (3) 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.

Article 43. Lending limitations

1. A securities company may not lend money and securities in any form, unless it lends money to its client for purchase of securities in accordance with regulations of the Ministry of Finance on margin securities transactions.

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

Article 44. 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 fifty per cent (50%) of its total asset value.

3. A securities company may use no more than seventy per cent (70%) of its equity capital to purchase corporate bonds or contribute capital to another institution, and may use no more than twenty per cent (20%) of its equity capital to invest in unlisted companies.

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

a/ Stocks or contributed capital amounts of a company that holds more than fifty per cent (50%) of its charter capital, except for the case of purchase of odd-lot stocks at the request of clients;

b/ Fifty per cent (50%) or more of the charter capital of another securities company, together with affiliated person;

c/ More than twenty per cent (20%) of total outstanding stocks or fund certificates of a listed institution;

d/ More than fifteen per cent (15%) of total outstanding stocks or fund certificates of an unlisted institution. This provision is not applicable to member fund certificates;

e/ Invest in or contribute more than ten per cent (10%) of total contributed capital of a limited liability company or business project;

f/ More than fifteen per cent (15%) of its equity capital in an institution.

5. A securities company may establish or purchase a fund management company as its affiliate company. In this case, the securities company is not required to comply with the provisions of Points c, d and e, Clause 4 of this Article. A securities company that intends to establish or purchase a fund management company as its affiliate 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 legal 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 one hundred and eighty per cent (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 42 of this Circular and the investment limitations prescribed in Clause 3 of this Article and Point f, 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 one (1) year.

Chapter VI

OPERATIONS OF SECURITIES COMPANIES

Section 1

GENERAL PROVISIONS

Article 45. Operation principles

1. Securities companies shall issue their professional processes and internal control and risk management processes applicable to their licensed professional operations.

2. Securities companies shall issue rules of professional practice ethics conformable with their business operations.

3. Securities companies shall assure separation of working offices, staffs, data systems and reports of their professional sections in order to avoid conflicts of interest between them and their clients or among their clients. Securities companies shall notify in advance their clients of possible conflicts of interest between them, their securities practitioners and their clients.

4. Securities companies shall arrange securities practitioners to perform professional operations relevant to their securities practice certificates. Securities practitioners performing the securities dealing operation may not concurrently perform the securities brokerage operation.

5. Securities companies may neither make judgments nor guarantee clients of the level of earnings or yields earnable from their investments or of no losses, except for investment in droplock securities.

6. Securities companies may not disclose information on their clients, unless so consented by their clients or so requested by competent state management agencies.

7. Securities companies may not take acts misleading their clients and investors as to securities prices.

8. Securities companies that forecast prices of, or recommend transactions in, a particular type of securities in the mass media shall clearly provide the grounds of analysis and sources of information quoted.

Article 46. Operation suspension

1. A securities company that suspends securities business operation at its head office, branch or transaction bureau shall obtain approval of the State Securities Commission. The suspension duration must not exceed ninety (90) days. Upon the expiration of this duration, the State Securities Commission shall revoke the establishment and operation license or relevant establishment decision.

2. A dossier of request for approval of operation suspension must be made in one (1) original set and submitted directly or sent by port to the State Securities Commission, and comprise:

a/ A written request for operation suspension (made according to the form provided in Appendix XIV to this Circular);

b/ The decision of the Board of Directors, Members’ Council or Owner of the securities company on the operation suspension;

c/ A plan on handling of contracts signed with clients which remain valid.

3. Within fifteen (15) days after receiving a valid dossier as specified in Clause 2 of this Article, the State Securities Commission shall issue a decision to approve the suspension of operation of the head office, branch or transaction office of the securities company. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

4. A securities company shall report to the State Securities Commission within twenty four (24) hours after its head office, branch or transaction office resumes operation.

Section 2

SECURITIES BROKERAGE OPERATION

Article 47. Securities brokerage responsibility

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 prevention and combat of 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 brokerage contracts, receiving and executing securities trading orders or paying for securities transactions with clients;

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

e/ Reveal contents of trading orders placed by clients or other confidential information acquired through conducting transactions for clients which are not for disclosure or can only be disclosed for inspection and examination prescribed by law;

f/ Use names or accounts of clients for securities registration and trading;

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

Article 48. Opening of 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 that client’s written request for account opening and under a contract on opening of a securities trading account with that client. A written request for account opening must have the minimum contents specified in Appendix XV to this Circular. A contract on opening of an account must have the minimum contents specified in Appendix XVI to this Circular.

2. Securities companies are 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 49. Responsibilities toward clients

1. When providing consultancy to securities trading clients, securities companies shall collect sufficient information on these clients and may not guarantee values of securities they recommend clients to invest in.

2. Securities companies are obliged to update changed information of clients at the latter’s request.

3. Securities companies shall directly 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. Securities companies shall announce securities trading charges before their clients conduct transactions.

5. Securities companies are obliged to monitor in detail money and securities of each client, provide information on the balance and newly added amounts of money (if any) and securities to clients at their request.

6. Securities companies shall set up a specialized section in charge of communication with clients and settlement of client questions and complaints.

Article 50. 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 (if any) of each client at any time and provide a detailed statement of the money balance (if any) of each client at any time at the request of such client or a competent state agency.

The securities company shall realize 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 be entrusted by 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 three (3) 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. 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 XVII to this Circular. Data to be reported are those obtained at the end of the working day preceding the reporting day.

Article 51. 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 shall redeposit securities of their clients at the Vietnam Securities Depository within one (1) working day after receiving clients’ valid dossiers for securities depository;

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 58 and 59 of this Circular.

Article 52. 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 may receive online trading orders after registration with the State Securities Commission in accordance with regulations.

3. In case of receiving 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/ Assure full recording of information at the time of order receipt and keep proofs of clients’ orders;

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

d/ Taking 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, securities code, trading method, type of order, securities volume and trading price. Trading orders of clients must have ordinal numbers and 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. Securities companies may only receive securities purchase or sale orders of their clients when holding one hundred per cent (100%) of money or securities amounts 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 right 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.

Section 3

SECURITIES DEALING OPERATION

Article 53. Securities dealing

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 capacity of another party or a person. Securities companies may not let others use their dealing accounts.

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

a/ Purchase or sale of securities due to post-trading error correction;

b/ Purchase or sale of treasury stocks.

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

Section 4

SECURITIES ISSUANCE UNDERWRITING OPERATION

Article 54. Conditions for issuance underwriting

A securities company may conduct issuance underwriting under firm commitments if it satisfies the following conditions:

1. Being licensed to conduct the securities issuance underwriting operation;

2. Ensuring that at the time of signing an issuance underwriting contract, the total value of valid issuance underwriting contracts under firm commitments satisfies the following conditions:

a/ It does not exceed one hundred per cent (100%) of the equity capital according to the latest quarterly financial statement;

b/ It does not exceed fifteen (15) times the difference between short-term assets and short-term liabilities according to the latest quarterly financial statement.

3. Not being placed under control or special control within three (3) months prior to the time of signing an issuance underwriting contract.

Article 55. Issuance underwriting limitations

1. 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 affiliated 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 Director (General Director) of the issuing institution;

b/ At least 30% of the charter capital of the securities company and at leas 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 affiliated 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 Director (General Director) of the securities company;

d/ A member of the Board of Directors, the Director (General Director) or an affiliated person of the securities company is concurrently a member of the Board of Directors or the Director (General Director) of the issuing institution;

e/ A member of the Board of Directors, the Director (General Director) or an affiliated person of the issuing institution is concurrently a member of the Board of Directors or the Director (General Director) of the securities company;

f/ 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.

Section 5

SECURITIES INVESTMENT CONSULTANCY OPERATION

Article 56. Responsibilities of securities companies

1. 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. 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.

Article 57. Prohibited acts

Unless otherwise provided by law, a securities company providing investment consultancy services may neither directly nor indirectly commit the following acts:

1. Making securities investment decisions on clients’ behalf.

2. Reaching agreement with clients on profit- or loss-sharing.

3. Advertising or declaring that its securities analyses, analysis efficiency or method is of higher value than that of another securities company.

4. Providing untruthful information to entice or call upon clients to purchase or sell a certain type of securities.

5. Providing falsified, deceiving or misleading information to clients.

6. Other acts in violation of law.

Section 6

SECURITIES DEPOSITORY OPERATION

Article 58. Scope of securities depository operation

A securities company possessing a depository operation certificate may provide the following services:

1. Providing securities registration and depository services for clients.

2. Making payments for securities transactions on the stock exchanges for clients.

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

Article 59. Rights and obligations of a securities company performing the depository operation

1. To open securities depository accounts for its clients, manage these accounts in accordance with law. Securities depository accounts of clients must be separated from its own securities depository account.

2. 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.

3. To preserve, store, collect and process data related to the securities depository operation and clearing payment of clients.

4. 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.

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

Section 7

FINANCIAL CONSULTANCY OPERATION

Article 60. Provisions on financial consultancy operation

1. A securities company may provide financial consultancy, covering:

a/ Consultancy on restructuring, merger, consolidation, reorganization, purchase or sale of businesses;

b/ Consultancy on corporate governance and strategy elaboration;

c/ Consultancy on securities offering and listing;

d/ Consultancy on corporate equitization and valuation;

e/ Other financial consultancy in accordance with law.

2. A securities company that holds 10 per cent (10%) or more of the charter capital of another company may not provide services specified at Points c and d, Clause 1 of this Article to that company.

3. Securities companies providing financial consultancy shall comply with the Securities Law and other relevant laws.

Section 8

OTHER FINANCIAL SERVICES

Article 61. Entrusted management of securities trading accounts of individual investors

1. General principles:

a/ A securities company licensed to conduct concurrently securities brokerage and investment consultancy operations may be entrusted to manage securities trading accounts on the basis of contracts on entrustment of securities trading account management signed with individual clients;

b/ 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;

c/ 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);

d/ Securities companies shall designate their securities practitioners possessing financial analysis or fund management practice certificates to manage trading accounts under entrustment.

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;

e/ 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 one (1) 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 (if any);

- Entrustment contents;

- Rights and obligations of the contracting parties;

- Charge for contract management and bonuses (if any);

- 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;

e/ To provide monthly or extraordinary statements of transactions at the request of entrusting clients;

f/ To notify clients within twenty-four (24) hours after the assets on such clients’ accounts for entrusted transactions fall below twenty-five per cent (25%) of the total value of the entrustment contracts;

g/ To make monthly reports (according to the form provide in Appendix XXII 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;

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

k/ 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 62. Other financial services

1. Securities companies may provide other financial services as prescribed and guided by the Ministry of Finance.

2. The services mentioned in Clause 1 of this Article must be relevant to and support the licensed ones of securities companies and must not affect the interests of clients, securities companies themselves and the market.

Chapter VII

REORGANIZATION OF SECURITIES COMPANIES

Section 1

TRANSFORMATION OF SECURITIES COMPANIES

Article 63. Forms of transformation of securities companies

1. Single-member limited liability securities companies may be transformed into those with two or more members and vice versa.

2. Limited liability securities companies may be transformed into joint-stock companies and vice versa.

Article 64. Conditions for transformation of securities companies

1. The transformation of a company and transformation plan must be approved by the Shareholders’ General Meeting, Members’ Council or Owner.

2. A securities company formed after transformation must satisfy the conditions specified in Clauses 1, 2, 3 and 4, Article 3 of this Circular.

3. In case of transformation into a single-member limited liability company, a securities company shall comply with the provision of Point b, Clause 5, Article 3 of this Circular.

4. The transformation of a company must not affect the interests of its clients.

5. The transformation of a company must comply with other relevant laws.

Article 65. Procedures for transformation of companies

1. A to-be-transformed securities company must obtain approval of the State Securities Company. A dossier of request for approval of company transformation must be made in one (1) original set to be submitted directly or sent by post to the State Securities Commission, and comprises:

a/ A written request for approval of company transformation (made according to the form provided in Appendix XVIII to this Circular);

b/ The meeting minutes and the decision of the Shareholders’ General Meeting, Members’ Council or Owner on the company transformation;

c/ The transformation plan approved by the Shareholders’ General Meeting, Members’ Council or Owner;

d/ A dossier of request for approval of transfer of ten per cent (10%) or more of the paid-up charter capital (if any) specified in Clause 2, Article 30 of this Circular;

e/ Documents evidencing the satisfaction of the provision of Clause 3, Article 64 of this Circular.

2. Within thirty (30) days after receiving a complete and valid dossier specified in Clause 1 of this Article, the State Securities Commission shall issue a decision to approve the transformation. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

3. Securities companies shall be transformed in accordance with the Enterprise Law. In case the transformation of a securities company is combined with private placement or public offering of shares, the company shall comply with relevant regulations on offering.

4. After the transformation, a securities company shall carry out procedures for requesting the re-grant of an establishment and operation license. A dossier of request for re-grant of a license must be made in one (1) original set to be submitted directly or sent by post to the State Securities Commission, and comprises:

a/ A written request for re-grant of an establishment and operation license (made according to the form provided in Appendix I to this Circular);

b/ A report on the result of implementation of the transformation plan, including a list of shareholders and capital-contributing members of the company after the transformation (made according to the form provided in Appendix V to this Circular), a report on the result of transfer of ten per cent (10%) or more of the charter capital (if any) (made according to the form provided in Appendix XIII to this Circular), and a report on the result of offering of shares (if any);

c/ A written description of the physical foundation for the performance of securities business operations at the head office (made according to the form provided in Appendix II to this Circular);

d/ A tentative list of the Director (General Director) and securities practitioners at the head office (made according to the form provided in Appendix III to this Circular) enclosed with valid copies of their securities practice certificates; the personal information sheet of the Director (General Director) (made according to the form provided in Appendix IV to this Circular);

e/ Certification of the increased capital (if any) by the bank where the frozen account is opened or by an audit organization approved by the State Securities Commission;

f/ A draft charter of the company after the transformation;

g/ The original establishment and operation license of the transformed securities company.

5. The State Securities Commission shall inspect the physical foundation of the securities company if after the transformation such company relocates its head office or clarify matters related to the physical foundation of the company after the transformation.

6. Within thirty (30) days after receiving a complete and valid dossier specified in Clause 4 of this Article and the result of inspection of the physical foundation (if any), the State Securities Commission shall re-grant the establishment and operation license. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

7. Securities companies formed after the transformation shall take over all rights and obligations of transformed securities companies.

8. Transformed securities companies shall disclose information in accordance with current regulations.

9. Branches and transaction offices of securities companies that continue their operation after the transformation shall have their decisions on approval of their establishment specified in Articles 20 and 23 of this Circular readjusted. Branches and transaction offices that do not continue their operation shall carry out procedures for their closure  in accordance with Articles 19 and 22 of this Circular.

Section 2

CONSOLIDATION AND MERGER OF SECURITIES COMPANIES

Article 66. Conditions for consolidation or merger

1. Securities companies formed after consolidation or merger must satisfy the conditions specified in Clauses 1, 2, 3 and 4, Article 3 of this Circular.

2. The consolidation or merger and consolidation or merger plan must be approved by the Shareholders’ General Meeting, Members’ Council or Owner.

3. The consolidation or merger must not affect the interests of clients (if any).

4. Securities companies involved in the consolidation or merger must comply with the competition law and other relevant laws.

Article 67. Procedures for consolidation or merger

1. A to-be-consolidated or -merged securities company must obtain approval of the State Securities Company. A dossier of request for approval of consolidation or merger must be made in one (1) original set to be submitted directly or sent by post to the State Securities Commission, and comprises:

a/ A written request for approval of consolidation or merger (made according to the form provided in Appendix XIX to this Circular);

b/ The meeting minutes and decisions of the Shareholders’ General Meetings, Members’ Councils or Owners on the consolidation or merger of the companies involved in the consolidation or merger;

c/ An in-principle contract on consolidation or merger (including the minimum contents according to the form provided in Appendix XX to this Circular);

d/ The consolidation or merger plan approved by the Shareholders’ General Meetings, Members’ Councils or Owners of the companies involved in the consolidation or merger, including a plan on handling of brokerage accounts (if any) of clients (including the minimum contents according to the form provided in Appendix XXI to this Circular);

e/ A dossier of request for approval of transfer of ten per cent (10%) or more of the paid-up charter capital (if any) specified in Clause 2, Article 30 of this Circular;

2. Within thirty (30) days after receiving a complete and valid dossier specified in Clause 1 of this Article, the State Securities Commission shall issue a decision to approve the consolidation or merger. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

3. Securities companies shall be consolidated or merged in accordance with the Enterprise Law.

4. After the consolidation or merger, the securities company shall carry out procedures for requesting the re-grant of an establishment and operation license. A dossier of request for re-grant of a license must be signed by the at-law representatives of the companies involved in the consolidation or merger and made in one (1) original set to be submitted directly or sent by post to the State Securities Commission, and comprises:

a/ A written request for re-grant of an establishment and operation license (made according to the form provided in Appendix I to this Circular);

b/ A report on the result of implementation of the consolidation or merger plan;

c/ A list of shareholders or capital-contributing members of the company after the consolidation or merger; the result of the transfer of ten per cent (10%) or more of the charter capital (if any);

d/ A written description of the physical foundation for the performance of securities business operations at the head office (made according to the form provided in Appendix II to this Circular);

e/ A tentative list of the Director (General Director) and securities practitioners at the head office (made according to the form provided in Appendix III to this Circular) enclosed with valid copies of their securities practice certificates; the personal information sheet of the Director (General Director) (made according to the form provided in Appendix IV to this Circular);

f/ A draft charter of the company after the consolidation or merger;

g/ The original establishment and operation licenses of the companies involved in the consolidation or merger.

5. The State Securities Commission shall inspect the physical foundation of the securities company if after the consolidation or merger such company relocates its head office or clarify matters related to the physical foundation of the company after the transformation.

6. Within thirty (30) days after receiving a complete and valid dossier specified in Clause 4 of this Article and the result of the inspection of the physical foundation (if any), the State Securities Commission shall re-grant the establishment and operation license. In case of refusal, the State Securities Commission shall reply in writing, clearly stating the reason.

7. Securities companies formed after the consolidation or merger shall take over all rights and obligations of securities companies involved in the consolidation or merger.

8. Securities companies after the consolidation or merger shall disclose information in accordance with current regulations.

9. Branches and transaction bureaus of securities companies that continue their operation after the consolidation or merger shall request the State Securities Commission’s approval of their establishment in accordance with Articles 18 and 21 of this Circular. Branches and transaction bureaus that do not continue their operation shall carry out procedures for their closure in accordance with Articles 19 and 22 of this Circular.

Chapter VIII

REPORTS, INFORMATION STORAGE AND DISCLOSURE

Article 68. Reports

Securities companies shall send written reports or transmit reports in electronic data files to the State Securities Commission within the following time limits and according to the following provisions:

1. For periodical reports:

a/ Before the 5^th day of a month, a securities company shall send a report on its operation in the preceding month (made according to the form provided in Appendix XXII to this Circular);

b/ Before the 20^th day of a quarter, a securities company shall send a quarterly financial statement of the preceding quarter;

c/ Within forty five (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 already examined by an audit organization approved by the State Securities Commission;

d/ For annual reports:

- Before January 20 of a year, a securities company shall send a summary report on its operation in the preceding year (made according to the form provided in Appendix XXIII to this Circular);

- Before March 31 of a 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 audited by an independent audit company accredited by the State Securities Commission.

e/ A financial statement of a securities company sent to the State Securities Commission as specified at Point b, c or d of this Clause includes an accounting balance sheet, a report on business operation results, a cash flow report and a written explanation of the financial statement in accordance with the accounting law. The written explanation of the financial statement must have all contents specified by law and must be made according to current accounting standards and regulations. In case the written explanation of the financial statement refers to an annex(es), such annex(es) must be published together with such written explanation. The written explanation of the financial statement must specifically present details of transactions with involved parties according to Vietnam’s accounting standards. The written explanation of the financial statement must have sectional reports according to Vietnam’s accounting standards. In case a securities company is a parent company of another institution, an annual financial statement includes a financial statement of the parent company and a consolidated financial report according to the accounting law.

f/ In case a financial statement contains an exceptional auditor’s 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 thirty (30) days after sending a report specified at Points c and d of this Clause.

2. Extraordinary reports:

a/ Within two (2) working days after a securities company signs a new labor contract or terminates an existing one with a securities practitioner, the securities company shall report such in writing to the State Securities Commission;

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

- It borrows or invests in excess of the limits specified in Articles 42 and 44 of this Circular;

- Its head office, branch or transaction bureau inaugurates operation.

3. 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.

Article 69. Preservation of dossiers and documents

1. Securities companies shall preserve all dossiers and documents in accordance with Article 12 of the Enterprise Law.

2. Securities companies shall preserve all dossiers of their clients and related vouchers and documents showing specifically and accurately transactions of their clients and their professional operations.

3. The period of preservation of the documents specified in Clause 2 of this Article is at least ten (10) years.

Article 70. Information disclosure

Securities companies shall disclose information in accordance with the securities and securities market law and other relevant laws.

Chapter IX

ORGANIZATION OF IMPLEMENTATION

Article 71. Organization of implementation           

1. This Circular takes effect on January 15, 2013, and replaces the Minister of Finance’s Decision No. 27/2007/QD-BTC of April 24, 2007, promulgating the Regulation on organization and operation of securities companies, and Decision No. 126/2008/QD-BTC of December 26, 2008, amending and supplementing a number of articles of the said Regulation.

2. Within one (1) year from the effective date of this Circular, securities companies shall revise their charters according to the model charter provided in Appendix XI to this Circular; set up and build risk management, internal audit and internal control systems as specified in Articles 35, 36 and 37 of this Circular; and manage money of their clients in accordance with Article 50 of this Circular.

3. From the effective date of this Circular, securities companies that have borrowing and investment ratios exceeding the limits specified in Clause 1 of Article 42 and Article 44 of this Circular may neither borrow new loans, extend existing loans or payable debts nor increase the investment ratio in any form.

4. Public securities companies and listed securities companies shall comply with this Circular and current regulations applicable to public companies and listed companies. In case there is an inconsistency between this Circular and regulations applicable to public companies and listed companies, such companies shall apply the provisions of this Circular.

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

For the Minister of Finance
Deputy Minister
TRAN XUAN HA

(Note: All appendices to this Circular are not translated.)