Circular No. 97/2007/TT-BTC dated August 08, 2007 of the Ministry of Finance guiding implementation of Decree 36/2007/ND-CP of the Government of March 8, 2007 on penalties for administrative offences in securities and securities market sector

CIRCULAR

GUIDING IMPLEMENTATION OF DECREE 36/2007/ND-CP OF THE GOVERNMENT OF MARCH  08^th, 2007 ON PENALTIES FOR ADMINISTRATIVE OFFENCES IN SECURITIES AND SECURITIES MARKET SECTOR

Pursuant to the Law on Securities dated 29 June 2006;

Pursuant to the Ordinance on Dealing with Administrative Offences dated 2 July 2002;

Pursuant to Decree 134/2003/ND-CP of the Government dated 14 November 2003 implementing the Ordinance on Dealing with Administrative Offences dated 2 July 2002;

Pursuant to Decree 36/2007/ND-CP of the Government dated 8 March 2007 on penalties for administrative offences in the securities and securities market sector;

Pursuant to Decree 77/2003/ND-CP of the Government dated 1 July 2003 on functions, duties, powers and organizational structure of the Ministry of Finance;

The Ministry of Finance provides the following guidelines on Decree 36/2007/ND-CP:

I. GENERAL PROVISIONS

1. Governing scope and applicable entities:

1.1 Governing scope:

This Circular applies to administrative offences in the securities and securities market sector as stipulated in Decree 36/2007/ND-CP of the Government dated 8 March 2007 on penalties for administrative offences in the securities and securities market sector (hereinafter referred to as Decree 36).

1.2 Applicable entities:

Any Vietnamese organization or individual or any foreign organization or individual participating in investment in securities and activities on the Vietnamese securities market, or any other organization or individual involved in securities market activities, who intentionally or unintentionally breaches the provisions of the law on securities and securities market but not to the level justifying criminal prosecution, shall be dealt with for an administrative breach in accordance with the provisions of Decree 36 and this Circular.

2. Applicable forms of penalty for an administrative offence:

2.1 The applicable forms of penalty for an administrative offence and the measures for remedying consequences shall be as stipulated in article 7 of Decree 36.

2.2 The person issuing the penalty decision shall rely on the act constituting the administrative offence in the securities and securities market sector, the forms and levels of penalties stipulated in Chapter II of Decree 36, and on any mitigating or aggravating circumstances as stipulated in article 6 of Decree 36 in order to issue a decision on the form and level of the penalty including forms of additional penalty or application of measures for remedying consequences appropriate to the nature and seriousness of the breach.

2.3 A specific fine, including a case with mitigating or aggravating circumstances, shall not be lower or higher than the levels of fine within the framework stipulated for such offence. The average of the levels of fine within any one stipulated framework shall be calculated in accordance with article 24 of Decree 134/2003/ND-CP of the Government dated 14 November 2003 implementing the Ordinance on Dealing with Administrative Offences.

2.4 Only one of the two main forms of penalty, namely a warning or a fine, shall be imposed for an act constituting an administrative offence. Forms of additional penalty may not be independently applied but may only accompany application of the main form of penalty.

3. Mitigating and aggravating circumstances:

3.1 The mitigating or aggravating circumstances of an administrative offence in the securities and securities market sector shall be as stipulated in article 6 of Decree 36.

3.2 The following guidelines shall apply to a number of mitigating or aggravating circumstances:

(a) The person authorized to impose a penalty decision shall consider and make a decision on a number of cases of mitigating circumstances such as taking the initiative to prevent a continuation of the offence; mitigating loss; voluntarily redressing the consequences; or voluntarily paying compensation for loss caused by ones act. There must be evidence to prove mitigating circumstances in cases where the offence was committed due to a lack of understanding; the offence was committed during spiritual or material dependency; or the offence was committed due to incitement, enticement or under compulsion.

(b) The aggravating circumstance that the offender has committed a number of offences means the offender has committed a number of administrative offences in the securities and securities market sector but has not yet been subject to an administrative penalty; repeat offence means the offender has committed a previous administrative offence in the securities and securities market sector and was administratively penalized for it but before expiry of the [statutory] period after which an administrative offence shall be deemed not to have been committed, the offender continued to conduct an act constituting an administrative offence in such sector.

II. CONDUCT IN BREACH

1. The following guidelines shall apply to a number of acts in breach as stipulated in Decree 36:

1.1 The expression in clause 1 of article 9 Preparing an application file for registration of a public offer of securities containing incorrect, misleading or incomplete information which is required by law and the expression in clause 2(a) of article 9 Deliberate announcement of information which is incorrect or which hides the truth means that an issuing organization, the director or general director, a deputy director or deputy general director, the chief accountant or an affiliated person of the issuing organization, the underwriter or the consultant advising on preparation of the application file provides information which is inaccurate, incomplete or which hides the truth about important items relevant to the certificate of registration of the offer, the prospectus, the charter, the resolution of the general meeting of shareholders passing the offer tranche, or the decision of the board of management, of the members council or of the company owner passing the offer plan, the undertaking to underwrite (if any), or other relevant data.

1.2 The expression in clause 2(b) of article 9 Using information outside the prospectus in order to conduct market research prior to receiving permission to undertake the public issue of securities means that an issuing organization, the director or general director, a deputy director or deputy general director, the chief accountant or an affiliated person of the issuing organization, the underwriter or the consultant uses information which is inaccurate compared to the contents of the prospectus in order to advertise [or] offer securities prior to receiving permission to undertake the public issue, affecting the price of securities and the investment decision of investors.

1.3 The expression in clause 3 of article 9 The issuing organization, the director or general director, the chief accountant or any other affiliated person of the issuing organization, the underwriter, the consultant advising on the issue, the auditing organization which provided approval, the signatory to the audit report or any organization or individual who certified the application file for registration of the public offer of securities which contains false information means intentionally creating incorrect data about important items relevant to the certificate of registration of the offer, the prospectus, the charter, the resolution of the general meeting of shareholders passing the offer tranche, or the decision of the board of management, of the members council or of the company owner passing the offer plan, the undertaking to underwrite (if any), or other relevant data. Such data caused misunderstanding, and affected the decision of the State Securities Commission to issue the certificate of registration of the public offer and the investment decision of investors.

1.4 The expression in clause 2(a) of article 10 Failing to lodge a file with the State Securities Commission within ninety days of the date of its becoming a public company means a company which has shares owned by at least one hundred (100) investors excluding institutional investors and which has paid-up charter capital of ten (10) billion Vietnamese dong or more fails to lodge a public company file with the State Securities Commission within ninety days of the date of its becoming a public company.

1.5 The expression in clause 2(b) of article 10 The public company file registered with the State Securities Commission contains incorrect or incomplete information as required means that the public company intentionally or unintentionally prepared a file [and/or] provided information which is inaccurate, incomplete or which hides the truth about important items relevant to the company charter; the business registration certificate; [or] summarized information about the scale of the business operation, management apparatus, shareholding structure and financial statements for the most recent year.

1.6 The expression in clause 2 of article 13 A listing organization or the director or general director, deputy director or deputy general director, chief accountant or any other affiliated person of the listing organization, the consultancy organization advising on the listing, the auditing organization which provided approval, the signatory to the audit report or any organization or individual who certified the application file for listing containing false information which caused serious misunderstanding means intentionally creating incorrect data about the certificate of registration of listing, the prospectus, the charter, the resolution of the general meeting of shareholders passing the listing, the consultancy contract (if any) or other relevant data. Such data seriously affected the decision of the Stock Exchange or Securities Trading Centre to issue permission for listing and the appraisal and investment decision of investors.

1.7 Clauses 1 and 2 of article 14 on organization of a securities trading market means that no organization or individual is permitted to organize a securities trading market outside the Stock Exchange or a Securities Trading Centre.

1.8 Clause 2 of article 18 on organizing securities trading at a securities company means that any trading of securities listed at a Securities Trading Centre must correctly comply with the Trading Rules of the Securities Trading Centre.

1.9 Clause 1 of article 26 on acting fraudulently or cheating during securities trading on the market means specific conduct by an individual investor or institutional investor regarding a transaction as follows:

(a) Directly or indirectly participating in activity creating false information or excluding essential information causing serious misunderstanding and affecting the operation being securities issuing, listing, trading, business, investment or services;

(b) Directly participating in announcement of false information aimed at enticing or inducing the purchase or sale of securities, or failing to promptly announce complete information about an event affecting the market price of securities;

(c) Directly or indirectly participating in price rigging, in trading to create an artificial securities price, or in false trading; intentionally providing false data or, falsifying or destroying data on transactions in order to cheat or induce clients to purchase or sell securities.

1.10 Clause 1 of article 27 on inside trading during securities trading means conduct by an individual investor or institutional investor which has valuable inside information and which uses such information before it is publicly announced in order to purchase or sell securities for itself or which provides such information to a third party in order to receive a commission on a large illegal gain made from valuable inside information.

1.11 Clause 1 of article 28 on trading in order to manipulate the price of securities means an individual investor or institutional investor conducts a transaction in order to cause all other investors to misunderstand the market, and in particular the following transactions:

(a) Creating a circular [or round robin] transaction, namely the offender sells to another person and after a circle the transaction returns to the initial seller but there is no profit received by any of the sellers or purchasers and the aim was only to create regular transactions of sale and purchase of such type of securities;

(b) Conducting transactions between sellers and purchasers but without any profit and with all transaction fees paid by a third party;

(c) Trading in order to create a constant price for such type of securities (the market price neither increases nor reduces), deemed to be trading in order to maintain a constant market price;

(d) Trading in order to create a new opening or closing price for such type of securities on the market.

1.12 The expression in clause 2(b) of article 33 Failing to report or reporting outside the time-limit on the occurrence of an unusual event which seriously affects financial capacity and ability to conduct the business operation or provide securities services means that the Stock Exchange, a Securities Trading Centre, a Securities Depository Centre, a public company, a listing organization, a securities company, a fund management company, a securities investment company or a custodian bank fails to report or reports outside the time-limit on the occurrence of an unusual event which seriously affects its own financial status, business operation or provision of securities services resulting in a fluctuation of the price of securities on the market.

1.13 The expression in clause 1 of article 34 Delaying, hiding or failing to provide prompt and complete information, data or databases at the request of an inspection group or an inspector means failing to provide or intentionally delaying the time of providing data files or databases at the request of an inspection group or an inspector; failing to arrange or failing to promptly arrange for someone to work with the inspection group or arranging for an unauthorized person to work with the inspection group; failing to provide the information actually reported, actual accounting source vouchers and other files requested by the inspection group; or other acts of delaying or hiding information as stipulated by law.

2. Other acts in breach shall be interpreted as stipulated in Decree 36.

III. AUTHORITY AND PROCEDURES FOR IMPOSING PENALTIES

1. Authority to impose administrative penalties:

1.1 The head of the Securities Inspectorate shall have authority:

(a) To impose a warning;

(b) To impose a fine up to seventy million VND for a breach for which an additional penalty or a measure in order to remedy consequences is not applied.

1.2 The chairman of the State Securities Commission shall have authority:

(a) To impose a warning;

(b) To impose a fine up to seventy million VND;

(c) To impose additional penalties and measures in order to remedy consequences as stipulated in clauses 2 and 3 of article 7 of Decree 36;

(d) To impose fines for the conduct in breach as stipulated in clauses 3 and 4 of article 9 and in clause 2 of article 14 of Decree 36.

1.3 Delegation of authority to impose penalties for administrative offences:

If the person authorized to impose penalties as stipulated in clauses 1.1 and 1.2 above is absent, then such person shall have authority to delegate authority to his or her direct deputy by providing a written authorization. Such authorization must be implemented in accordance with article 36 of Decree 36 and the law on dealing with administrative offences.

2. Penalty decisions:

2.1 A penalty decision must be signed and sealed by the person authorized to impose administrative penalties.

2.2 Only one penalty decision shall be issued in the case of any one offending individual or organization committing a number of different offences. In the case of a number of offending individuals and/or organizations jointly committing one breach, then the person authorized to impose administrative penalties shall rely on the nature and seriousness of the breach by each offender to issue a separate penalty decision in respect of each offending individual or organization.

2.3 If the form and level of penalty exceed the jurisdiction of an authorized person, then such authorized person must transfer the entire file to the higher level authorized person within five working days from completion of such file.

The file shall comprise:

- Minutes of an administrative offence (original);

- Penalty decision (original);

- File and data relevant to the administrative offence;

- Minutes of confiscation of exhibits and means used to commit the administrative breach (if any);

- Other essential data.

2.4 A penalty decision must be sent to the offending organization or individual and to the body collecting fines, and published on the website of the State Securities Commission, within a time-limit of three working days from the date of issuance of the decision.

3. Cessation of conduct constituting an administrative breach:

If during the course of a check or inspection there is detection of conduct in breach in the securities and securities market sector, the head of the inspection group shall issue a temporary written order for the cessation of such administrative breach pursuant to article 37 of Decree 36 and immediately provide written notice to the head of the Securities Inspectorate or to the chairman of the State Securities Commission to issue a [permanent] decision for the cessation of such administrative breach.

4. Transferring cases to a person authorized to impose administrative penalties:

4.1 If a competent State body, during the course of a check or inspection of an organization or individual, detects conduct constituting an administrative breach in the securities and securities market sector which exceeds the jurisdiction of such body to impose penalties, then it shall transfer the entire file with its written proposal to the State Securities Commission for the latter to resolve the matter.

The file shall comprise the minutes of an administrative offence (original); and the source vouchers, other data files, exhibits and so forth relevant to the administrative offence in the securities and securities market sector which were collated during the course of the check or inspection of such organization or individual.

4.2 The State Securities Commission shall be responsible to receive the transfer from a competent State body of any file on a case of an administrative offence in the securities and securities market sector, and deal with it as follows:

(a) If the data and minutes of the case as received fail to comply with article 38 of Decree 36 and these guidelines, then the State Securities Commission shall, within fifteen working days from the date of the letter transferring the file [to the SSC], return the file and require the competent State body which prepared the minutes of an administrative breach to amend or add to the file to make it complete.

(b) If the data and evidence [provided] is insufficient to provide grounds for imposing a penalty for an administrative offence, then the Inspectorate shall seek or obtain additional evidence and if it is sufficient to make such a conclusion then the Inspectorate shall issue a decision imposing a penalty for an administrative offence.

5. Transferring files on offences in order to monitor compliance with the penalty decision:

After the head of the Securities Inspectorate or the chairman of the State Securities Commission has issued a decision imposing a penalty for an administrative offence, the inspection group or inspector shall transfer the file on the offence to the section [or department] with the function of monitoring compliance with the decision imposing the penalty.

6. Order and procedures for imposing administrative penalties:

Any person authorized to impose penalties for administrative offences in the securities and securities market sector must correctly comply with the order and procedures for imposing administrative penalties as stipulated in the Ordinance on Dealing with Administrative Offences, Decree 134, Decree 36 and this Circular.

IV. IMPLEMENTING PROVISIONS

1. This Circular shall be of full force and effect fifteen (15) days after the date of its publication in the Official Gazette.

2. The State Securities Commission shall instruct and guide the Securities Inspectorate to strictly comply with all regulations on imposing penalties for administrative offences.

3. Any problems arising during implementation should be promptly reported to the Ministry of Finance for its resolution.