Decree No. 86/2016/ND-CP dated July 01, 2016 of the Government on requirements for investment and trading in securities

DECREE

Prescribing the securities investment and trading conditions[1]

Pursuant to the June 19, 2015 Law on Organization of the Government;

Pursuant to the June 29, 2006 Securities Law; and the November 24, 2010 Law Amending and Supplementing a Number of Articles of the Securities Law;

Pursuant to the November 26, 2014 Investment Law;

Pursuant to the November 26, 2014 Enterprise Law;

At the proposal of the Minister of Finance;

The Government promulgates the Decree prescribing the securities investment and trading conditions.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation and subjects of application

1. This Decree prescribes the securities investment and trading conditions which institutions and individuals must satisfy when conducting investment and trading activities on the Vietnamese securities market.

2. This Decree applies to securities companies, fund management companies, securities investment companies, Vietnam-based branches of foreign securities trading institutions, depository members, trading members, payment banks, supervisory banks, stock exchanges, the Vietnam Securities Depository and related bodies, institutions and individuals on the Vietnamese securities market.

Article 2. Interpretation of terms 

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

1. Securities company means a business established and operating in accordance with the securities law to conduct one, several or all of the following operations: securities brokerage, securities dealing, securities issuance underwriting and securities investment consultancy, and allowed to provide financial services in accordance with the securities law.

2. Fund management company means a business established and operating in accordance with the securities law to conduct the following operations: management of securities investment funds, management of securities investment portfolios and securities investment consultancy.

3. Foreign securities trading institutions include securities companies and fund management companies established abroad.

4. Vietnam-based branch of a foreign securities company or fund management company means a subsidiary of such company that has no legal person status and may provide securities trading services in Vietnam.

5. Margin trading means the practice of purchasing securities with money borrowed from a securities company, in which newly purchased securities and other securities permitted for margin trading of a client may be used as collateral for the above borrowing.

6. Day trading means buying and selling a security in a certain trading volume, on the same trading account and within the trading day.   

7. Payment bank means a bank providing the service of paying money for securities transactions on the Stock Exchange.

Article 3. General provisions on securities investment and trading

1. Upon their establishment and in the course of investment and trading activities on the Vietnamese securities market, institutions and individuals must satisfy and maintain the conditions prescribed in this Decree and other securities investment and trading conditions (if any) prescribed in the Securities Law and relevant government decrees.

2. In the course of operation, when there is a change in the trading operations, name, trading location, charter capital, at-law representative or head of a securities trading institution, branch of a securities trading institution or Vietnam-based branch of a foreign securities trading institution, or when a securities trading institution is reorganized, in addition to complying with the enterprise law, such change or reorganization shall be approved by the Shareholders’ General Meeting, Management Board, Members’ Council or owner of such institution in accordance with the securities law and be registered with the State Securities Commission.

3. The order and procedures for securities investment and trading activities of domestic and foreign institutions and individuals on the Vietnamese securities market must comply with the securities law.

Article 4. Conditions for foreign institutions to hold 51% or more of charter capital of securities trading institutions in Vietnam

A foreign institution may hold 51% or more of charter capital of a securities trading institution in Vietnam when satisfying the following conditions:

1. Complying with Clauses 6 and 10, Article 71 of the Government’s Decree No. 58/2012/ND-CP of July 20, 2012, detailing and guiding the implementation of a number of articles of the Securities Law and the Law Amending and Supplementing a Number of Articles of the Securities Law (below referred to as Decree No. 58/2012/ND-CP), and Clauses 21 and 24, Article 1 of the Government’s Decree No. 60/2015/ND-CP of June 26, 2015, amending and supplementing a number of articles of Decree No. 58/2012/ND-CP (below referred to as Decree No. 60/2015/ND-CP).

2. Having the purchase of shares or capital contribution portions to hold 51% or more of the charter capital of the securities trading institution in Vietnam approved by its Shareholders’ General Meeting, Members’ Council or owner.

3. Being permitted by the Shareholders’ General Meeting, Members’ Council or owner of the concerned securities trading institution in Vietnam to purchase shares or capital contribution portions to hold 51% or more of the charter capital of such institution, except where it offers a public bid in accordance with the securities law.

4. Using its equity and other lawful capital sources only to purchase shares or capital contribution portions and being not subject to holding limitations prescribed at Point c, Clause 7, and Point c, Clause 8, Article 71 of Decree No. 58/2012/ND-CP.

5. Having made its latest annual financial statement (or the latest consolidated annual financial statement in case it is a parent company) and had it audited in accordance with foreign law and the international accounting and auditing standards by the time of submission of its dossier.

Chapter II

INVESTMENT AND TRADING CONDITIONS OF SECURITIES COMPANIES

Article 5. Conditions for grant of an establishment and operation license of a securities company 

1. Conditions on working office, physical foundations and equipment:

a/ Having a working office that ensures securities trading activities;

b/ Having sufficient physical and technical foundations, office equipment and computer and software systems to serve investment analysis, risk analysis and management, archive and preservation of documents, and equipment to guarantee safety and security for the working office under the guidance of the Ministry of Finance. For securities issuance underwriting and securities investment consultancy operations, the conditions on equipment are not required.

2. Condition on capital:

Having fully contributed capital by the time of the company’s establishment which must be at least equal to the legal capital level prescribed in Clause 1 or 2, Article 71 of Decree No. 58/2012/ND-CP.

3. Condition on human resources:

Having a tentative list of its personnel, including at least 3 securities practitioners suitable to each trading operation for which an establishment and operation license is applied; and having a general director (director) who must satisfy the following criteria:

a/ Having full civil act capacity and being neither examined for penal liability nor serving an imprisonment sentence nor banned by the court from practicing certain business lines in accordance with law;

b/ Having at least 3 years’ experience of working in the financial, banking or securities field at a professional section or at a financial, an accounting or an investment section in another business and having at least 3 years’ management and administration experience;

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

d/ Having not been sanctioned in accordance with the securities and securities market law within the past 12 months before submission of a dossier;

dd/ Having never committed a violation specified at Point b, Clause 1, Article 80 of the Securities Law.

4. Condition on shareholders and capital-contributing members:       

Having a structure of shareholders and capital-contributing members which complies with Clauses 5, 6, 7 and 10, Article 71 of Decree No. 58/2012/ND-CP, and the provisions applicable to foreign investors in Clauses 21 and 24, Article 1 of Decree No. 60/2015/ND-CP, and satisfies the following conditions:

a/ At the time of establishment registration, capital-contributing institutions have no accumulative loss on their audited latest annual financial statements and examined latest biannual financial statements (if any);

b/ In case the securities company is organized as a single-member limited liability company, its owner must be a commercial bank, an insurance business or a foreign institution satisfying the conditions prescribed in Article 4 of this Decree.

Article 6. Conditions for addition of securities trading operations of securities companies

A securities company may add securities trading operations after obtaining approval from the State Securities Commission when satisfying the following conditions:

1. Complying with the provisions of Clauses 1, 2 and 3, Article 5 of this Decree for existing securities trading operations and those expected to be added.  

2. Being not under control or special control or having not had its operation suspended within the last 3 months before submission of its registration dossier.

Article 7. Conditions for reorganization of securities companies

A securities company may be consolidated or merged or transform its corporate type when satisfying the following conditions:

1. The company formed after the reorganization must satisfy the conditions prescribed in Clauses 1, 2 and 3, Article 5 of this Decree. In case the securities company is reorganized into a single-member limited liability one, its owner must satisfy the condition prescribed at Point b, Clause 4, Article 5 of this Decree.

2. In case the reorganization is combined with the private placement of shares or public offering of shares or transactions which require approval from the State Securities Commission, the conditions prescribed by the relevant laws must be satisfied.

3. Satisfying the conditions prescribed by the competition law and other relevant laws on reorganization of enterprises.

Article 8. Conditions for registration of provision of margin trading, day trading, derivative trading, clearing and transaction payment services

1. A securities company may conduct margin trading after obtaining approval from the State Securities Commission when satisfying the following conditions:

a/ Having been licensed to conduct securities brokerage and had its margin trading approved by its Management Board, Members Council or owner;

b/ Being a member of the Stock Exchange and Vietnam Securities Depository and being neither subject to warning, placed under control or special control or subject to operation cessation or suspension, nor consolidated, merged, dissolved or bankrupt;

c/ Having no accumulative loss equal to or higher than 50% of its charter capital as stated in the audited latest annual financial statement or examined latest biannual financial statement within the past 6 months before registration of provision of the margin trading service. Auditor opinions in the latest annual financial statement and examined latest financial statement must be unqualified ones;

d/ Having the total debt-to-equity ratio of 3 or under and an equity not lower than the legal capital level and having set aside sufficient provisions;

dd/ Having the liquidity ratio of at least 180% in the 12 consecutive months before registration of provision of the margin trading service;

e/ Having a trading system to serve margin transactions and supervise margin trading accounts; a system to separately manage each investor’s deposited money for securities trading at a bank; and professional, risk management and margin trading operation control processes.

2. A dossier for registration of provision of the margin trading service must comprise:

a/ The original written registration of provision of the margin trading service;

b/ A copy of the resolution of the Management Board or Members’ Council or owner of the securities company on margin trading practice;

c/ The original written explanation of the trading system to serve margin trading and supervise margin trading accounts, including information technology and software systems;

d/ Margin trading operation, risk management and margin trading control processes.

3. A dossier prescribed in Clause 2 of this Article shall be made in one set accompanied by a soft copy and sent directly or by post to the State Securities Commission. Within 15 working days after receiving a valid dossier, the State Securities Commission shall issue a written approval permitting the securities company to conduct margin trading. In case of refusal to issue an approval, the State Securities Commission shall issue a written reply to the securities company, clearly stating the reason for refusal.

4. A securities company may provide the day trading service to clients after obtaining approval from the State Securities Commission when satisfying the following conditions:

a/ Having all of its securities trading operations licensed and the provision of the day trading service approved by its Management Board, Members’ Council or owner;

b/ Complying with the provisions of Points b, c and d, Clause 1 of this Article;

c/ Having infrastructure facilities and a trading system to serve day trading and a system to manage and supervise day trading activities on accounts of clients; having professional and risk management processes for the day trading operation; and having a system to separately manage each investor’s deposited money for securities trading at a bank;

d/ Having a liquidity ratio of at least 220% in the past 12 consecutive months before registration of provision of the day trading service.

5. A securities trading institution may provide the derivative trading service when satisfying the following conditions:

a/ Complying with the provisions of Clause 1, Article 4 of the Government’s Decree No. 42/2015/ND-CP of May 5, 2015, on derivatives and derivative market (below referred to as Decree No. 42/2015/ND-CP);

b/ Having set aside all required provisions and suffering no loss in the last 2 years; having a liquidity ratio of at least 220% in the past 12 consecutive months before submission of a dossier;

c/ Accredited auditor opinions in the last fiscal year’s annual financial statement and the examined latest biannual financial statement (if any) are unqualified ones.

6. A securities company, commercial bank or foreign bank branch may provide the derivative clearing or trading payment service when satisfying the following conditions:

a/ Complying with Clause 2, Article 4 of Decree No. 42/2015/ND-CP and Point c, Clause 5 of this Article;

b/ For a securities company: Having set aside all required provisions and suffering no loss in the last 2 years; having a liquidity ratio of at least 260% in the past 12 consecutive months before submission of a dossier;

c/ For a commercial bank or foreign bank branch: Complying with the provisions of the banking law on capital adequacy in the past 12 consecutive months before submission of a dossier.

Article 9. Conditions for establishment or addition of operations of branches or trading offices of securities companies

1. A securities company that establishes a branch must satisfy the following conditions:

a/ Maintaining the current conditions for business licensing for its head office and existing branches and trading offices (if any);

b/ Being neither placed under control or special control nor subject to operation cessation in accordance with law at the time of establishment of branch;

c/ Having not been sanctioned for administrative violations in the field of securities and securities market within the past 6 months before its dossier of request for establishment of a branch is received by the State Securities Commission;

d/ Having an office and equipment to serve authorized securities trading activities at the branch as prescribed at Point b, Clause 1, Article 5 of this Decree;

dd/ Appointing a director for the branch who satisfies the criteria prescribed at Points a and d, Clause 3, Article 5 of this Decree, possesses a securities practice certificate relevant to trading operations the branch will conduct, and has at least 2 years’ professional financial, banking or securities experience and at least 1 year’s managerial experience; and having at least 2 securities practitioners suitable to each trading operation to be conducted at the branch.

2. A securities company may add operations to be conducted at its branch when satisfying the following conditions:

a/ Complying with the provisions of Points a, d and dd, Clause 1 of this Article, for existing securities trading operations and those expected to be added;

b/ Being neither placed under control or special control nor subject to operation cessation within the past 3 months before submission of a dossier.

3. A securities company that establishes a trading office must satisfy the following conditions:

a/ Satisfying the conditions prescribed at Points a, b and c, Clause 1 of this Article at the time of establishment of a trading office;

b/ Having an office and equipment to serve the securities trading operations;

c/ Having at least 2 securities practitioners working at the trading office expected to be established;

d/ Locating the trading office within the province or centrally run city where its head office or branch is located.

4. The State Securities Commission shall inspect physical foundations and workings offices of branches of securities companies expected to conduct the securities brokerage or dealing operation or of trading offices before deciding to approve their establishment.

Article 10. Conditions, dossiers and procedures for establishment and operation of Vietnam-based branches of foreign securities companies

1. A foreign securities company may establish only one branch in Vietnam when satisfying the following conditions:

a/ Being lawfully operating but not in the state of consolidation, merger, division, splitting up, dissolution or bankruptcy; having been licensed to conduct the securities trading operations expected to be registered for its Vietnam-based branch; being from a country where the specialized securities management and supervision agency has entered into bilateral or multilateral cooperation agreements with the State Securities Commission of Vietnam on exchange of information and management, inspection and supervision of securities activities and market;

b/ Allocating to its Vietnam-based branch a capital amount at least equal to the legal capital level prescribed in Clause 1 or 2, Article 71 of Decree No. 58/2012/ND-CP for the securities trading operations to be registered for such branch;

c/ Having the remaining operation duration (if any) of at least 5 years as stated in its license;

d/ Having processes of risk management and organization of securities trading operations in compliance with Vietnamese law;

dd/ Being not a shareholder or capital-contributing member holding, or not holding, together with an affiliated person, directly or through a mandate or an investment entrustment, over 5% of the charter capital of a securities company in Vietnam;

e/ Having the establishment of its branch in Vietnam approved by its competent authority;

g/ Ensuring that the branch to be established in Vietnam comply with the provisions of Clauses 1 and 3, Article 5 of this Decree.

2. Vietnam-based branches of foreign securities companies may conduct securities trading activities like securities companies, except direct management of deposited money for securities transactions of clients and opening of securities trading accounts for domestic investors.

3. A dossier of application for an establishment and operation license for a Vietnam-based branch of a foreign securities company must comprise:

a/ The original application for an establishment and operation license for a Vietnam-based branch of a foreign securities company signed by a competent representative of the foreign securities company;

b/ A copy of the charter of the foreign securities company and decision on allocation of capital of the foreign securities company to its Vietnam-based branch;

c/ A copy of the establishment and operation license of the foreign securities company or an equivalent document issued by a competent agency of the country of origin;

d/ Certification by a competent agency or organization of the foreign country where the foreign securities company is headquartered that such company is neither under control or special control nor in another warning state, unless otherwise prescribed by the law of such foreign country;

dd/ The financial statement of the last fiscal year of the foreign securities company (or the consolidated financial statement of the last fiscal year in case the foreign securities company is a parent company) made and audited in accordance with foreign law and in conformity with international accounting and auditing standards;

e/ A copy of the meeting minutes (if any) and decision of the Shareholders’ General Meeting, Management Board or Members’ Council, or decision of the owner or competent representative as stated in the charter of the foreign securities company on the establishment of a branch in Vietnam;

g/ The original list of the branch’s director and professional staff members expected to be appointed, bearing the signature of a competent person of the foreign securities company, and enclosed with personal files and judicial records issued within the past 6 months before the submission of a dossier and with other documents proving that the branch’s director and practicing staff satisfy the human resource conditions when the branch is established;

h/ The original written explanation of physical foundations and equipment of the branch office, enclosed with a copy of the contract or on-principle contract for rent of the branch office and with documents certifying the lessor’s right to own, use or lease the office;

i/ The processes of risk management and organization of securities trading operations.

4. A dossier prescribed in Clause 3 of this Article shall be made in one set in Vietnamese enclosed with a soft copy. It shall be submitted directly or sent by post to the office of the State Securities Commission. Foreign-language papers and documents in the dossier shall be consularly legalized and translated into Vietnamese. Vietnamese translations of foreign-language documents shall be notarized or bear authenticated signatures of translators in accordance with law.

Within 20 days after receiving a dossier prescribed in Clause 3 of this Article, if it is incomplete or invalid, the State Securities Commission shall request in writing the foreign securities company to amend or supplement the dossier; if such dossier is complete and valid, the State Securities Commission shall notify the foreign securities company to fully satisfy the physical foundation and human resource conditions and freeze the capital amount allocated to the branch. The foreign securities company may use the allocated capital of the branch to invest in the branch’s physical foundations. The rest of the allocated capital amount shall be frozen on the account opened at a commercial bank designated by the State Securities Commission and then released and transferred to the account of the branch immediately after its establishment and operation license becomes valid.

Within 6 months after the State Securities Commission requests in writing the completion of the dossier of application for an establishment and operation license for a branch, the foreign securities company shall supplement and complete the dossier under regulations. Past that time limit, if the company fails to amend or supplement documents and complete the dossier or fails to give adequate explanations as requested, the State Securities Commission may refuse to grant an establishment and operation license for its branch.

5. The State Securities Commission shall inspect the physical foundations and working office of the branch of a foreign securities company expected to conduct the securities brokerage or dealing operation before issuing its approval.

6. Within 7 days after receiving a written certification of capital freezing, written record of inspection of the physical foundations and other valid documents specified in Clause 3 of this Article, the State Securities Commission shall grant an establishment and operation license for a Vietnam-based branch of a foreign securities company. In case of refusal to grant a license, the State Securities Commission shall reply in writing, clearly stating the reason.

7. Within 30 days after its branch’s establishment and operation license becomes effective, a foreign securities company shall apply for a seal at the public security agency, announce the branch’s establishment and operation license on a printed or online newspaper permitted to be distributed in Vietnam in 3 consecutive issues.

8. Within 15 days after commencing its operation, the Vietnam-based branch of a foreign securities company shall send to the State Securities Commission a notice of the date of operation commencement and documents proving that the foreign institution has completed the procedures prescribed in Clause 7 of this Article.

9. A Vietnam-based branch of a foreign securities company may add securities trading operations when satisfying the following conditions:

a/ Satisfying the conditions prescribed at Points a, c and d, Clause 1 of this Article;

b/ Being neither placed under control or special control nor suspended from operation within the past 3 months before submission of a dossier;

c/ Complying with the provisions of Clauses 1, 2 and 3, Article 5 of this Decree regarding the existing securities trading operations and operations expected to be added.

10. A Vietnam-based branch of a foreign securities company may request the State Securities Commission to modify its establishment and operation license in case of addition or reduction of its trading operations; change of its director, name and location, the head office of the foreign securities trading institution, registered place of business of the foreign securities company, legal status or any changes related to the division, splitting up, merger or consolidation of the foreign securities company.

11. After being granted an establishment and operation license, a Vietnam-based branch of a foreign securities company shall perform the obligation of reporting, disclosing information and complying with relevant regulations on organization, operation and financial adequacy applicable to securities companies.

12. A Vietnam-based branch of a foreign securities company may be dissolved after obtaining approval from the State Securities Commission. The dossier, procedures and order for dissolution are those applicable to securities companies that are single-member limited liability companies.

Chapter III

INVESTMENT AND TRADING CONDITIONS OF FUND MANAGEMENT COMPANIES AND SECURITIES INVESTMENT COMPANIES

Article 11. Conditions for grant of an establishment and operation license of a fund management company

1. Conditions on working office, physical foundations and equipment:

Satisfying the conditions prescribed in Clause 1, Article 5 of this Decree.

2. Condition on capital:

Having fully contributed capital by the time of the company’s establishment which must be at least equal to the legal capital level prescribed in Clause 3, Article 71 of Decree No. 58/2012/ND-CP.

3. Condition on human resources:

Having a tentative list of its personnel, including at least 5 persons possessing a fund management practice certificate; and having a general director (director) and deputy general directors (deputy directors) in charge of professional operations (if any) who must:

a/ Satisfy the conditions prescribed at Points a, d and dd, Clause 3, Article 5 of this Decree;

b/ Have at least 5 years’ experience of working in financial, banking and insurance fields at a professional section or at a financial, accounting or investment section in another business;

c/ Possess a fund management practice certificate or one of the following international degrees or certificates:

- Certificate of asset management practice in the member states of the Organization for Economic Cooperation and Development (OECD); or

- Having passed an exam for a certificate of chartered financial analyst (CFA) level II or certified international investment (CII) level II (final level);

d/ Unless they are assigned to manage and administer institutions for receiving investment capital from entrusting funds or clients, securities practitioners may not concurrently act as official staff members of other economic institutions.

4. Conditions on shareholders and capital-contributing members:       

Having a structure of shareholders and capital-contributing members which satisfies the conditions prescribed in Clauses 5, 6, 7 and 10, Article 71 of Decree No. 58/2012/ND-CP, and complying with the provisions applicable to foreign investors in Clauses 21 and 24, Article 1 of Decree No. 60/2015/ND-CP, and satisfying the conditions prescribed at Point a, Clause 4, Article 5 of this Decree. In case the fund management company is organized as a single-member limited liability company, its owner must be a commercial bank, an insurance business, a securities company or a foreign institution satisfying the conditions prescribed in Article 4 of this Decree.

Article 12. Conditions for modification or supplementation of establishment and operation licenses of fund management companies

1. A fund management company may additionally take on the securities investment consultancy operation when satisfying the following conditions:

a/ Being not under control or special control or having not had its operation suspended within the past 3 months before submission of a dossier;

b/ Satisfying the conditions prescribed in Clause 1, Article 3 of this Decree and having an equity not lower than the legal capital level;

c/ Having at least one employee in the investment consultancy section to provide consultancy to clients. Professional staff members in the investment consultancy section must satisfy the conditions prescribed at Points a and d, Clause 3, Article 11 of this Decree, possess a securities trading practice certificate or satisfy the condition prescribed at Point c, Clause 3, Article 11 of this Decree, and may not concurrently work in the professional sections of fund management and asset management, the investment section and other sections that carry out asset transactions for entrusting funds and clients.

2. A fund management company may transform its corporate type when:

a/ The company to be formed after the transformation satisfies the conditions prescribed in Clauses 1, 2 and 3, Article 11 and Clause 2, Article 7 of this Decree;

b/ In case the company is reorganized into a single-member limited liability one, its owner must be a commercial bank, an insurance business, a securities company or foreign institution satisfying the conditions prescribed in Article 4 of this Decree.

3. A fund management company may be consolidated or merged with another fund management company when:

a/ The company to be formed after the consolidation or merger satisfies the conditions prescribed in Clauses 1, 2 and 3, Article 11, and Clause 2, Article 7 of this Decree;

b/ The conditions for consolidation or merger prescribed by the competition law and other relevant laws are satisfied.

Article 13. Conditions for establishment of branches of fund management companies

1. Except for the entrusted asset management operation, branches of fund management companies may provide the securities investment consultancy service and conduct other activities as assigned or authorized by their companies. A fund management company wishing to establish a branch must satisfy the following conditions:

a/ Having a working office, facilities and equipment satisfying the conditions prescribed in Clause 1, Article 11, and at Points b and c, Clause 1, Article 9 of this Decree;

b/ Appointing a director for the branch who satisfies the conditions prescribed in Clause 3, Article 11 of this Decree, and having at least one employee who satisfies the conditions prescribed at Points a and d, Clause 3, Article 11 of this Decree and possesses a securities trading practice certificate or satisfies the condition prescribed at Point c, Clause 3, Article 11 of this Decree to work at the branch;

c/ Complying with the provisions of Clause 1, Article 3 of this Decree and having an equity not lower than the legal capital level.

2. Conditions for a foreign securities trading institution having the fund management operation to establish a branch in Vietnam:

a/ Being not in the state of consolidation, merger, division, splitting up, dissolution or bankruptcy;

b/ Satisfying the condition prescribed in Clause 3, Article 74 of Decree No. 58/2012/ND-CP;

c/ Allocating to the to be-established branch a capital amount at least equal to the legal capital level as prescribed in Clause 3, Article 71 of Decree No. 58/2012/ND-CP;

d/ Satisfying the conditions prescribed in Clauses 1 and 3, Article 11 of this Decree.

Article 14. Conditions for grant or modification of establishment and operation licenses of securities investment companies

1. The conditions for grant of establishment and operation licenses for public securities investment companies and real estate securities investment companies are prescribed in Article 79 of Decree No. 58/2012/ND-CP. Conditions for grant of establishment and operation licenses for private securities investment companies are prescribed in Article 87 of Decree No. 58/2012/ND-CP.

2. The renaming or change of the fund management company, depository bank or supervisory bank of a securities investment company shall be approved by the Shareholders’ General Meeting of such company before being approved by the State Securities Commission.

3. Conditions for consolidation or merger of a securities investment company:

a/ The consolidation or merger, consolidation or merger plan; and consolidation or merger contract are approved by the Shareholders’ General Meeting;

b/ In case of stock swap combined with cash payment, every shareholder of the merged company may receive a money amount not exceeding 10% of the net asset value on one stock on the date of consolidation or merger;

c/ In case of consolidation or merger of private securities investment companies, the company formed after the consolidation or merger must satisfy the conditions prescribed in Article 87 of Decree No. 58/2012/ND-CP.

4. Conditions for extension of the operation duration of a securities investment company:

a/ Such extension is approved by the Shareholders’ General Meeting of the company;

b/ The net asset value of the company in the last valuation period before submission of the dossier of request for extension is at least VND 50 billion.

Chapter IV

REGISTRATION OF SECURITIES DEPOSITORY OPERATION, PAYMENT BANKS AND SUPERVISORY BANKS

Article 15. Conditions for registration of depository members of the Vietnam Securities Depository

1. A securities company or commercial bank in Vietnam that registers to be a depository member of the Vietnam Securities Depository must satisfy the following conditions:

a/ Having a securities depository operation registration certificate granted by the State Securities Commission;

b/ Having at least one member on the Board of Directors assigned to take charge of securities registration, depository and clearing payment;

c/ Having employees working at the depository operation section who have completed a professional training course run by the Vietnam Securities Depository;

d/ Having securities registration, depository, clearing and payment processes conformable with current laws and professional operation regulations of the Vietnam Securities Depository;

dd/ Having an information technology system that satisfies the securities registration, depository, clearing and payment requirements in accordance with current laws and professional operation regulations of the Vietnam Securities Depository.

2. A depository member may register to provide the securities depository service for its branches when satisfying the following conditions:

a/ Complying with the provisions of Points b, c, d and dd, Clause 1 of this Article;

b/ Having obtained decisions of the State Securities Commission permitting these branches to conduct the securities depository operation.

Article 16. Conditions for banks to register to act as payment banks

1. The State Securities Commission shall select banks to act as payment banks for underlying securities transactions and those to act as payment banks for derivative securities transactions on the stock exchange. The selection of a payment bank shall be conducted by the State Securities Commission once every 5 years in accordance with law.

2. A commercial bank may register to act as a payment bank when satisfying the following conditions:

a/ Having a paid-up charter capital of over VND 10 trillion;

b/ Having profitable business results in the last 2 years;

c/ Satisfying the condition on minimum capital adequacy ratio prescribed by the banking law;

d/ Having a physical and technical facility system to serve the trading payment which is connectable with the Vietnam Securities Depository;

dd/ Having made a commitment with the State Securities Commission on provision of loans for securities trading payment in case a depository member becomes insolvent;

e/ Ensuring that its physical and technical facility system can store data on trading payment for at least 5 years and provide such data immediately to the State Securities Commission or Vietnam Securities Depository within 48 hours upon any request.

Article 17. Conditions for banks to register to act as supervisory banks

A bank may register to act as a supervisory bank when satisfying the following conditions:

1. Being a commercial bank possessing a securities depository operation registration certificate and having the function of providing depository services and supervising the management of public funds and securities investment companies.

2. Having at least 2 professional staff members who possess the following certificates:

a/ Certificate of securities and securities market law training;

b/ Certificate of training in securities and securities market basics or securities trading practice certificate or certificate of CFA or CIIA level I or higher level or securities trading practice certificate granted in an OECD member state;

c/ Accountant or auditor or chief accountant certificate or international certificate in the accounting or auditing field, such as Association of Chartered Certified Accountants (ACCA), Certified Public Accountants (CPA), Chartered Accountants (CA) and Associate Chartered Accountants (ACA).

3. Supervisory banks, members of Management Boards, members of Executive Boards and staff members of supervisory banks directly engaged in the preservation of fund assets and supervision of the asset management of fund management companies must neither be affiliated persons nor participate in the management and governance of fund management companies nor have ownership relations with, contribute capital to, hold shares of, lend to or borrow from, fund management companies to which supervisory banks provide supervisory services, and vice versa.

4. Supervisory banks, members of Management Boards, members of Executive Boards and staff members of supervisory banks may not act as purchase and sale partners in transactions of purchase and sale of fund assets, except for foreign exchange transactions in accordance with relevant laws or for securities transactions conducted via the trading system of the stock exchange. 

5. To supervise operations of real estate securities investment companies, a supervisory bank must have at least 2 professional staff members who possess a real estate valuator certificate in accordance with the law on real estate business or a price appraiser card.

Chapter V

ESTABLISHMENT OF BRANCHES AND REPRESENTATIVE OFFICES, OFFSHORE INVESTMENT

Article 18. Conditions for a securities trading institution to establish an overseas branch or representative office or conduct offshore investment activities

1. Having a plan on establishment of an overseas branch or representative office or offshore investment which is approved in writing by its Shareholders’ General Meeting, Members’ Council or owner.

2. Satisfying the financial safety requirements after subtracting the capital amount to be allocated to the overseas branch, expenses for establishment of the overseas representative office, or offshore investment capital.

3. Ensuring that the scope of operation of the overseas branch or representative office is within the scope of business under the securities trading institution’s establishment and operation license.

4. Complying with Article 73 of Decree No. 58/2012/ND-CP.

Article 19. Conditions for securities trading institutions to conduct offshore investment activities

1. Securities trading institutions that conduct offshore investment activities in the form of purchase and sale of securities and other valuable papers or through securities investment funds or other intermediary financial institutions abroad shall comply with the law on offshore investment and other relevant laws.

2. When conducting offshore investment activities in forms other than those specified in Clause 1 of this Article, securities trading institutions must satisfy the conditions prescribed in Article 18 of this Decree and relevant regulations.

Chapter VI

SECURITIES PRACTICE CERTIFICATES

Article 20. Principles of securities business practice and types of securities practice certificates

1. Securities practice certificates include:

a/ Securities broker certificate for those who practice securities brokerage or securities investment consultancy;

b/ Financial analyst certificate for those who practice securities brokerage, securities investment consultancy, securities dealing or securities issuance underwriting;

c/ Fund manager certificate for those who practice securities brokerage, securities investment consultancy, securities dealing, securities issuance underwriting, securities investment portfolio management or securities investment fund management.

2. Principles of securities practice:

a/ A securities practice certificate is valid only when its holder works for a securities company, fund management company or securities investment company and is notified by such company to the State Securities Commission. Granted securities practice certificates are valid indefinitely, except where they are revoked under Article 80 of the Securities Law;

b/ A person possessing any of the three securities practice certificates specified in Clause 1 of this Article and a professional operation certificate for derivatives and derivative market may practice the operation respectively prescribed for his/her certificate related to derivatives in a securities trading institution;

c/ A securities practice certificate holder may work in only one professional securities trading section at a time.

Article 21. Conditions for grant of securities practice certificates

1. A securities broker certificate shall be granted to an individual who satisfies the following conditions:

a/ The conditions prescribed at Point a, Clause 1, Article 79 of the Securities Law;

b/ Possessing a university or higher degree;

c/ Possessing professional certificates in the field of securities, including certificates of training in securities and securities market basics, law on securities and securities market, securities analysis and investment, securities brokerage and securities investment consultancy;

d/ Having passed the test for grant of a securities practice certificate which he/she wished to be granted.

2. A securities analyst certificate shall be granted to an individual who satisfies the following conditions:

a/ The conditions prescribed in Clause 1 of this Article;

b/ Possessing a financial analyst and securities issuance underwriter certificate or corporate financial statement analyst certificate.

3. A fund manager certificate shall be granted to an individual who satisfies the following conditions:

a/ The conditions prescribed in Clause 2 of this Article;

b/ Possessing a professional certificate for fund and asset management;

c/ Having at least 3 years’ experience of working in the financial or banking field or possessing one of the following certificates of chartered financial analyst (CFA), certified international investment analyst (CIIA), association of chartered certified accountants (ACCA) or certified public accountants (CPA).

4. Exempt from possessing professional certificates in the securities field specified in Clauses 1, 2 and 3 of this Article are the following individuals:

a/ Those possessing CIIA or a written certification of having passed the level-II or higher-level CFA test, who are exempt from possessing a certificate of securities and securities market basics, securities analysis and investment or corporate financial statement analysis;

b/ Those possessing ACCA, CPA or auditor certificate or accounting practice certificate granted by the Ministry of Finance or a written certification of having passed the level-I CFA or level-I CIIA test, who are exempt from possessing a certificate of securities and securities market basics or corporate financial statement analysis;

c/ Those possessing a lawful securities practice certificate that is granted abroad or equivalent proving that they are permitted to conduct lawful securities practice abroad, who are exempt from possessing any  professional certificate in the securities field.

Chapter VII

IMPLEMENTATION PROVISIONS

Article 22. Effect and transitional provisions

1. This Decree takes effect on July 1, 2016.

2. To annul Clause 18, Article 2 of Decree No. 2012/ND-CP.

3. Vietnam-based foreign bank branches that have been granted securities depository operation registration certificates and have registered to act as depository members of the Vietnam Securities Depository before the effective date of the June 29, 2006 Securities Law may continue doing so.

4. Except the case of being transformed into a single-member limited liability company, a securities trading institution established before the effective date of this Decree and undergoing reorganization is not required to satisfy the condition on structure of shareholders or capital-contributing members prescribed in Clause 4, Article 5 and Clause 4, Article 11 of this Decree.

Article 23. Organization of implementation      

1. The Ministry of Finance shall guide the implementation of this Decree.

2. Ministers, heads of ministerial-level agencies, heads of government-attached agencies and chairpersons of provincial-level People’s Committees shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN XUAN PHUC