Circular 117/2020/TT-BTC method calculating unlawful earnings and profits from violations of the law on securities

CIRCULAR

Providing the method of calculating unlawful earnings and unlawful profits from violations of the law on securities and securities market

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Pursuant to the Law on Securities dated November 26, 2019;

Pursuant to the Law on Handling of Administrative Violations dated June 20, 2012;

Pursuant to the Government’s Decree No. 81/2013/ND-CP dated July 19, 2013, detailing a number of articles of and measures to implement the Law on Handling of Administrative Violations and the Government’s Decree No. 97/2017/ND-CP dated August 18, 2017, amending and supplementing a number of articles of Decree No. 81/2013/ND-CP dated July 19, 2013, detailing a number of articles of and measures to implement the Law on Handling of Administrative Violations;

Pursuant to the Government’s Decree No. 156/ND-CP dated December 31, 2020, providing for the sanctioning of administrative violations in the domains of securities and securities market;

Pursuant to the Government’s Decree No. 87/2017/ND-CP dated July 26, 2017, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

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

The Minister of Finance promulgates the Circular providing the method of calculating unlawful earnings and unlawful profits from violations of the law on securities and securities market.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Circular provides the method of calculating unlawful earnings and unlawful profits from violations of the law on securities and securities market.

Article 2. Subjects of application

1. Individuals, organizations committing acts of violation specified in the Government’s Decree No. 156/2020/ND-CP dated December 31, 2020, providing for the sanctioning of administrative violations in the domains of securities and securities market (hereinafter referred to as Decree No. 156/2020/ND-CP).

2. Persons competent to sanction administrative violations in the domains of securities and securities market specified in Article 47 of Decree No. 156/2020/ND-CP.

3. Persons competent to make written records of administrative
violations specified in Article 48 of Decree No. 156/2020/ND-CP.

4. Individuals, organizations related to the sanctioning of administrative violations in the domains of securities and securities market.

Chapter II

METHOD OF CALCULATING UNLAWFUL EARNINGS AND UNLAWFUL PROFITS FROM VIOLATIONS OF THE LAW ON SECURITIES AND SECURITIES MARKET

Article 3. Principles and methods of calculating unlawful earnings from manipulating securities market and using internal information to buy and sell securities

1. Unlawful earnings specified in Article 132 of the Law on Securities are the profit which organizations and individuals earn from manipulating securities market and using internal information to buy and sell securities, after deducting payable taxes and charges. Payable taxes and charges shall be provided and confirmed by the securities company.

2. Principles for determining unlawful earnings:

a) Unlawful earnings shall be determined from the time of beginning violations to the time of stopping violations;

b) The period of securities market manipulation is the period the violator commits the act of securities market manipulation, which will be displayed in the written record of administrative violations. The period of using internal information to buy and sell securities is the period when the violator uses internal information to buy and sell securities as displayed in the written record of administrative violations. The number of accounts participating in securities market manipulation or using internal information to buy and sell securities shall be determined in written records of administrative violations;

c) In case the organization or individual commits multiple violations, the earned unlawful earning shall be determined for each violation;

d) In case an organization or individual commits a repeated violation, the earned unlawful earning shall be determined for each violation;

dd) In case an organization or individual commits a violation for multiple securities numbers, the unlawful earning shall be determined according to each securities number;

e) In case an organization or individual uses multiple accounts to manipulate securities market or uses internal information to buy or sell securities, the unlawful earning shall be calculated on the total transactions of accounts used to commit violations after deducting intra-group transactions between accounts (if any). Intra-group transactions are transactions between accounts in which an actual transfer of ownership does not arise or the ownership only flows between accounts within the group.

g) In case a group of organizations or a group of individuals or a group of organizations and individuals commits acts of manipulating securities market or using internal information to buy or sell securities, the unlawful earning shall be calculated on the total transactions of the accounts used to commit the violation, after deducting intra-group transactions between accounts (if any);

In case there is no basis to determine the unlawful earning for each institutional or individual violator, the unlawful earning shall be divided equally among each violator;

h) On the basis of written records of administrative violations for securities market manipulation or the use of internal information to buy and sell securities, the head of the inspection team or the head of the examination team shall be responsible for calculating and setting up a report on the calculation of the unlawful earning for the Chairperson of the State Securities Commission to consider and decide.

In case of unlawful earnings from securities market manipulation or use of internal information to buy and sell securities. The Chairperson of the State Securities Commission shall establish the Council for calculating unlawful earnings. The composition of the Council for calculating unlawful earnings shall be decided by the Chairperson of the State Securities Commission. The Chairperson of the State Securities Commission shall consult with experts from the Ministry of Finance, securities-related socio-professional organizations, police agencies and other related agencies, organizations and individuals.

3. The unlawful earning earned from securities market manipulation shall be calculated according to the following formula:

Unlawful earning = (Average selling price - Average buying price) x (Volume of sold securities - Volume of securities traded within the group) - Payable taxes and fees.

a) Average selling price = (Value of sold securities - Value of securities traded within the group) / (Volume of sold securities - Volume of securities traded within the group);

b) In case the total volume of sold securities is less than or equal to the total volume of purchased securities during the manipulation period, the average purchase price shall be calculated as follows:

Average purchase price = (Value of purchased securities - Value of securities traded within the group) / (Volume of purchased securities - Volume of securities traded within the group);

c) In case the total volume of sold securities is greater than the total volume of purchased securities during the manipulation period, the average purchase price shall be calculated as follows:

Average purchase price = (Value of purchased securities + Value of spread securities - Value of intra-group traded securities) / (Volume of purchased securities + Volume of spread securities - Volume of securities traded within the group). In which:

Volume of spread securities = Volume of sold securities - Volume of purchased securities.

Value of spread securities = Volume of spread securities x Price of volume of spread securities.

Price of the volume of spread securities shall be the reference price of the starting date of the manipulation period;

d) Unlawful earnings earned from committing acts of securities market manipulation in the cases of securities price adjustment that are made during the period of securities market manipulation, shall be calculated as the total unlawful earning in the period before the price adjustment (ex-dividend date) and the unlawful earning in the period after the price adjustment.

Unlawful earnings in the period before the time of price adjustment and unlawful earnings in the period after price adjustment shall be calculated according to the formula specified in this Clause. In case the total volume of sold securities is greater than the total volume of purchased securities in the period after price adjustment, the price of the volume of spread securities specified at Point c of this Clause shall be the reference price at the ex-dividend date.

4. Unlawful earnings earned from securities market manipulation by causing a decrease in the stock price and then purchasing them shall be calculated according to the following formula:

Unlawful earning = (Average selling price - Average buying price) x (Volume of purchased securities - Volume of securities traded within the group) - Payable taxes and charges. In which the average selling price shall be determined according to Point a Clause 3 of this Article, the average buying price shall be determined according to Point b Clause 3 of this Article.

In case there is an adjustment in securities prices during the period of securities market manipulation, the unlawful earning shall equal to the total unlawful earning in the period before the time of price adjustment (ex-dividend date) and the unlawful earning in the period after price adjustment. The unlawful earning in each period shall be calculated according to the formula specified in this Clause.

5. Method for calculating unlawful earnings earned from using internal information to buy and sell securities:

a) In case internal information disclosed makes an increase in securities prices, the unlawful earning shall be calculated on the basis of the difference between the average selling price and the average buying price multiplied by the total volume of sold securities within 30 days from the date of disclosing the internal information after deducting payable taxes and charges. The period for calculating the average purchase price shall be determined from the time the violator uses internal information to buy securities to the time of disclosing the internal information;

b) In case internal information disclosed makes a decrease in securities prices, the unlawful earning shall be calculated on the basis of the difference between the average selling price and the average closing price for 10 consecutive trading days from the date of information disclosure multiplied by the total volume of securities sold after deducting payable taxes and charges. The period for calculating the average selling price shall be determined from the time the violator uses internal information to sell securities to the time of diclosing the internal information.

The time of disclosing internal information is the time when the information appears on one of the means of information disclosure according to the Minister of Finance’s Circular guiding the disclosure of information on securities market.

Article 4. Principles and methods of calculating unlawful profits earned from violations of securities and securities market

1. Unlawful profits earned from committing violations of the law on securities and the securities market according to Point d Clause 3 Article 4 of Decree No. 156/2020/ND-CP are those including money, valuable papers, assets and valuables earned by organizations and individuals due to violations of the law on securities and securities market after deducting payable taxes and charges.

2. Principles for determining unlawful profits:

a) In case an organization or individual commits many violations, earned unlawful profits shall be determined for each violation;

b) In case an organization or individual commits repeated violations, earned unlawful profits shall be determined for each time of committing the violation;

c) In case an organization or individual commits a violation for multiple securities numbers, unlawful profits shall be calculated according to each security number.

3. Method for calculating unlawful profits:

a) Unlawful profits earned from selling redeemed stocks specified at Point d Clause 2 Article 16 of Decree No. 156/2020/ND-CP shall be calculated according to the following formula:

Unlawful profits = Sold stocks x (Average stocks selling price - Average stocks buying price) - Payable taxes and charges.

In which:

Average stocks selling price = Total value of selling transactions / Total number of sold stocks.

Average stocks buying price = Total value of buying transaction /Total number of redeemed stocks:

b) Unlawful profits earned from committing the act of taking advantage of information on a takeover bid to buy and sell securities for themselves or to provide information, incite or entice others to buy and sell securities before the time of the official takeover bid specified in Clause 4 Article 17 of Decree No. 156/2020/ND-CP shall be calculated according to the method of calculating unlawful earnings earned from using internal information to buy and sell securities specified in Clause 5 Article 3 of this Circular;

c) Earned unlawful profits due to the act of organizing securities trading markets in contravention of the provisions of Clause 2 Article 42 of the Law on Securities, Clause 1 Article 20 of Decree No. 156/2020/ND-CP are the entire profits that organizations and individuals earn from organizing locations or forms of information exchange to gather orders to buy, sell and trade securities;

d) Unlawful profits earned from leasing or transferring licenses specified at Point b Clause 4 Article 24 of Decree No. 156/2020/ND-CP, unlawful profits earned from committing the act of leasing a securities practice certificate specified at Point a Clause 4 Article 32 of Decree No. 156/2020/ND-CP shall be the profit that organizations and individuals get from leasing or transferring the license, leasing securities practice certificates. Such profit shall be determined on the basis of contracts or agreements between leasing or transferring organizations and individuals and organizations and individuals renting and receiving transfers;

dd) The unlawful profit gained from lending accounts for securities trading or owning securities on behalf of others, which result in acts of securities market manipulation as specified in Clause 1 Article 34 of Decree No. 156/2020/ND-CP, shall be determined on the basis of the contract or agreement between the account borrower and the account lender, between the person asking the other to own securities on behalf of himself/herself and the asked one;

e) Unlawful profits earned from violations of regulations on foreign ownership ratio specified at Point a Clause 2 Article 34 of Decree No. 156/2020/ND-CP shall be the entire money, securities and other benefits arising from securities exceeding the foreign ownership ratio;

g) Earned unlawful profits due to violations of the transfer of privately offered securities specified in Clause 3 Article 34 of Decree No. 156/2020/ND-CP shall be calculated according to the following formula:

Unlawful profits = Transferred stocks x (Average stocks selling price - Average stocks buying price) - Payable taxes and charges.

In which:

Average stocks selling price = Total value of selling transaction of transferred stocks /Total number of transferred stocks.

Average stocks buying price = Total value of buying transactions / Total number of purchased stocks;

h) Unlawful profits earned from carrying out one or several transactions to hide information about the true ownership of a security to avoid or assist others to avoid obligations of disclosing information as prescribed or prescribed obligations when making public bid or regulations to be complied with regarding the foreign ownership ratio on the Vietnamese securities market specified in Clause 4 Article 34 of Decree No. 156/2020/ND-CP shall be calculated as follows:

- For organizations and individuals that carry out one or several transactions to hide information about the true ownership of a security to avoid the obligation to disclose information as prescribed or the prescribed obligation when making public bid or regulations to be complied with regarding the foreign ownership ratio on the Vietnamese securities market, unlawful profits gained by the violator through committing violations shall be the entire amount of money, securities and other benefits arising from securities that conceal the true ownership;

- For organizations and individuals that carry out one or several transactions to assist others in hiding information about the true ownership of a security to avoid the obligation to disclose information as prescribed or prescribed obligations when making public bid or obligations to be complied with regarding the foreign ownership ratio on the Vietnamese securities market, unlawful profits gained by the violator through committing violations shall be determined based on the contract or agreement between the parties;

 i) Earned unlawful profits due to acts of using assets of securities investment funds, securities investment companies, and entrusting investors in contravention of the law as prescribed in Clause 4 Article 40 of Decree No. 156/2020/ND-CP shall be the entire profit that the depository bank gains from using the assets of securities investment, securities investment companies, and entrusting investors in contravention of law.

Chapter III

IMPLEMENTATION PROVISIONS

Article 5. Effect

1. This Circular takes effect from February 15, 2021.

2. This Circular replaces the Minister of Finance’s Circular No. 217/2013/TT-BTC dated December 31, 2013, guiding the implementation of sanctions for administrative violations in the domains of securities and securities market and the Minister of Finance’s Circular No. 36/2017/TT-BTC dated April 27, 2017, amending and supplementing a number of articles of the Minister of Finance’s Circular No. 217/2013/TT-BTC dated December 31, 2013, guiding the implementation of sanctions for administrative violations in the domains of securities and securities market.

3. In case any legal documents referred to in this Circular are amended, supplemented or replaced, the new ones shall prevail.

4. Any problems arising in the course of implementation of this Circular should be reported to the Ministry of Finance for appropriate consideration and settlement./.