Decision No. 126/2008/QD-BTC dated December 26, 2008, of the Ministry of Finance amending and supplementing a number of articles of the Regulation on organization and operation of securities companies, issued together with the Finance Minister’s Decision No. 27/2007/QD-BTC of April 24, 2007

THE MINISTRY OF FINANCE

Decision No. 126/2008/QD-BTC of December 26, 2008, amending and supplementing a number of articles of the Regulation on organization and operation of securities companies, issued together with the Finance Minister’s Decision No. 27/2007/QD-BTC of April 24, 2007

THE MINISTER OF FINANCE

Pursuant to the June 29, 2006 Securities Law;

Pursuant to the Government’s Decree No. 14/2007/ND-CP of January 19, 2007, detailing the implementation of a number of articles of the Securities Law;

Pursuant to the 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,

DECIDES:

Article 1. To amend and supplement a number of articles of the Regulation on organization and operation of securities companies, issued together with the Finance Minister’s Decision No. 27/2007/QD-BTC of April 24, 2007, as follows:

1. To amend Clause 4, Article 3 as follows:

“4. Conditions for an individual capital contributor:

a/ Satisfying the conditions specified in Clause 2, Article 62 of the Securities Law, for individuals being founding shareholders or members;

b/ Using only his/her own capital to make capital contribution and refraining from using loans or investment capital entrusted by other organizations or individuals;

c/ Being capable of evidencing his/her capability to make capital contribution in cash, securities or other assets. The value of cash amounts, securities or other assets used to evidence the financial capability must be at least equal to the capital amount to be contributed to a securities company. The time for certifying the value of cash amounts, securities or other assets used to evidence the financial capability is 30 days by the date of obtaining a complete and valid dossier of application for establishment of the securities company.

For cash amounts, bank certification of the bank account balance in Vietnam dong or a freely convertible foreign currency is required.

For assets being securities, those securities must be listed on the Stock Exchange or Securities Trading Center and the securities company’s or the issuing organization’s certification of those securities is required. The price of securities shall be determined according to the closing price of the date of certifying the value of securities.

For other assets, their documents of title are required and those assets must be valuated by a valuation organization lawfully operating in Vietnam.

Assets used to evidence the financial capability of capital-contributing shareholders or members must not be mortgaged, pledged or deposited, involved in a dispute or used to evidence the financial capability of other enterprises or for other purposes.”

2. To amend Clause 5, Article 3 as follows:

“5. Conditions for a legal entity:

a/ Being lawfully operating; having been in operation for at least 5 years;

b/ A securities company set up in the form of joint-stock company or limited liability company of two or more members must have at least two (2) institutional founding shareholders or members, including at least one (1) commercial bank, financial company or insurance company.

The proportion of shares held or capital for contributed by institutional founding shareholders or members must account for at least 65% of the charter capital, of which the proportion of shares held or capital contributed by founding shareholders or members being commercial banks, financial companies or insurance companies must account for at least 30% of the securities company’s charter capital.

c/ For a securities company set up in the form of one-member limited liability company, its owner must be a commercial bank, financial company or insurance company.

d/ Contributed capital of legal entities must come from lawful sources and certified by an independent audit organization; legal entities may not use entrusted capital of other organizations and individuals to make capital contribution.

e/ The latest audited annual financial statement and the audited financial statement up to date (no more than 90 days by the time of obtaining a complete and valid dossier of application for establishment of a securities company) of a capital-contributing organization must satisfy the following conditions:

- Having its equity capital, after subtracting reward and welfare funds and long-term assets, at least equal to the capital amount to be contributed to the securities company.

For an insurance company, its equity capital plus idle capital from the provision fund for insurance operations, after subtracting long-term assets, must be at least equal to the capital amount to be contributed to the securities company.

For a commercial bank or financial company, its charter capital plus the reserve fund for charter capital supplementation, after subtracting long-term assets, must be at least equal to the capital amount to be contributed to the securities company.

- Having its net working assets at least equal to the to-be-contributed capital amount.

- Having earned profits from its business activities for two (2) consecutive years preceding the year of application for establishment of the securities company and having no accumulative loss by the time of obtaining a complete and valid dossier of application for establishment of the securities company.

e/ Insurance companies, commercial banks and financial companies contributing capital to establish a securities company must maintain and satisfy conditions on capital safety and other financial conditions as prescribed by specialized laws.”

3. To amend Clause 6, Article 3 as follows:

“6. Founding shareholders or members of a securities company may not transfer their initially contributed capital amounts within 3 years from the date of grant of the establishment and operation license, except for transfer to other founding shareholders or members, in which commercial banks, financial companies or insurance companies must always hold at least 30% of the charter capital of the securities company.”

4. To amend Point g, Clause 1, Article 4 as follows:

“g/ Documents evidencing the financial capability and contributed capital sources of capital-contributing shareholders or members, specifically:

- For individuals: documents specified in Clause 1, Article 1 of this Decision;

- For legal entities: the latest annual financial statement by the time of obtaining a complete and valid dossier, which is certified by a lawfully operating independent audit firm. Legal entities having subsidiaries or entering into joint ventures shall submit the audited consolidated financial statement of the latest year.

5. To amend Clause 1, Article 5 as follows:

“1. Within thirty (30) days after the receipt of a dossier specified in Article 4 of this Regulation, the State Securities Commission shall consider and approve in principle the grant of an establishment and operation license for a securities company. When necessary to clarify matters related to a dossier of application for an establishment and operation license for a securities company, the State Securities Commission may request the representative of founding shareholders or members or the person expected to be appointed or recruited to act as director (director general) of the securities company to give verbal or written explanations.

Within 30 days after the receipt of the State Securities Commission’s written request, founding shareholders or members of the securities company shall supplement and complete the dossier. Past the above time limit, if founding shareholders or members fail to supplement and complete the dossier, the State Securities Commission shall stop considering the dossier.

6. To amend Clause 2, Article 5 as follows:

“2. Within six (6) months after obtaining the in-principle approval, the institutional applicant for an establishment and operation license for a securities company shall complete the investment in its material and technical facilities, prepare an adequate contingent of securities practitioners and blockade the legal capital. The State Securities Commission shall inspect material facilities at the office of the securities company before officially granting an establishment and operation license. In case the preparations are not completed within the prescribed time limit, the in-principal approval will be revoked.”

7. To amend Clause 3, Article 5 as follows:

“3. The legal capital must be deposited in a blockaded account at a bank designated by the State Securities Commission and certified by that bank. This capital amount may be released and must be transferred into the securities company’s account only after the State Securities Commission officially grants an establishment and operation license.”

8. To amend Clause 6, Article 5 as follows:

“6. If any change occurs in the contributed capital and the structure of founding shareholders or members in the dossier of application for an establishment and operation license for a securities company in the period from the date of in-principal approval to the date of official operation commencement, the in-principal approval will be revoked.

9. To annul Article 11 on order-receiving agents.

10. To add the following Clause 5 to Article 29:

“5. A securities company may not provide loans in any forms to its major shareholders, members of the Control Board, members of the Board of Directors, members of the Members’ Council, members of the Directorate or affiliated persons of above-said subjects.”

Article 2. Within one (1) year after the effective date of this Decision, securities companies that have already set up order-receiving agents shall carry out procedures for closing down these agents and send a report thereon to the State Securities Commission within five (5) days before these agents cease their operation, enclosed with a written record on the liquidation of agency contracts.

Article 3. This Decision takes effect 15 days after its publication in “CONG BAO.”[1]

Article 4. The director of the Ministry’s Office, the Chairman of the State Securities Commission, heads of relevant units, securities companies and related parties shall implement this Decision.

For the Minister of Finance
Vice Minister
TRAN XUAN HA