On 01/7/2016, the Government issued Decree No.86/2016/ND-CP stipulating on conditions for investment and trading in securities. Accordingly, this Decree regulate the conditions for investment and trading in securities that organizations or individuals must satisfy when conducting investment and trading in Vietnamese securities market.
Any organizations or individuals, upon the establishment or during the investment and trading on the Vietnamese securities market, must satisgy and maintain conditions prescribed in this Decree and other requirements for investment and trading in securities (if any) prescribed in the Law on Securities and Decrees of the Government.
During the operation, if there is any changes to business service(s), name(s), business location(s), charter capital, legal representative(s) or head(s) of a securities trader, a branch of a securities trader, a branch of a foreign securities trader in Vietnam or restructuring of a securities trader, regulations on Enterprises Law must be complied and such change or restructuring must be adopted by the General Meeting of Shareholders, Board of Directors, Member assembly or owner(s) of such entity in accordance with law on the Law on Securities and be registered with State Securities Commission (hereinafter referred to as SSC).
To be issued a license for establishment and operation, securities companies must ensure the conditions of office buildings, infrastructure and equipment; capital; personnel; shareholders, limited partners. Contributed capital at the time of establishment of the company are equal at least to the legal capital prescribed in Cluase 1 and Clause 2 Article 71 of Decree 58/2012/ND-CP.
Conditions for shareholders and members
In terms of shareholders and members, the Decree states: Proportion of shareholders and members shall be in line with regulations of Clauses 5, 6, 7 and 10 Article 71 of Decree No.58/2012/ND-CP, regulations on foreign investors in Clause 21 and Clause 24 Article 1 of Decree No. 60/2015/ND-CP and the following conditions are satisfied:
a) At the time of establishment registration, capital contributors have no accumulated loss mentioned in the latest audited annual financial statement and the latest examined biannual financial statement (if any);
b) In case that the securities company is structured in the form of single member limited liability company, the owner must be a commercial bank, an insurer, or a foreign organization satisfying requirements reguated in Article 4 of this Decree.
Conditions for restructuring of securities companies
A securities company is entitled to engage in consolidation, acquisition or conversion of business type if the following requirements are satisfied: Post-restructuring company must comply with Clauses 1, 2 and 3 Article 5 of this Decree. In case where the post-restructuring company is a single-member limited liability company, its owner must comply with Point b Clause 4 Article 5 of this Decree; In case where the company combine the restructuring and private offering, public offering or a transaction approved by SSC, it is required to satisfy requirements of relevant law provisions; The post-restructuring company satisfy requirements prescribed in law on competition and other laws on enterprise restructuring.
The decree also specifies the requirements for registration of provision of margin trading service, day trading service, and trading, clearing and settlement of derivative trading service.
Accordingly, A securities company is entitled to provide margin trading service upon an approval of SSC when the following requirements are satisfied:
- It is licensed to provide securities brokerage service and is adopted by the Board of Directors, Member assembly or owner(s) of the securities company to provide margin trading service;
- It is a member of SE and VSD and is not in the state of warning, operational control, special control, mandatory suspension, voluntary suspension, consolidation, acquisition, dissolution, or bankruptcy;
- There is no accumulated loss of 50% or more of charter capital according to the latest audited annual financial statement or the latest examined biannual financial statement, provided that such statement is made within 6 months up to the time at which the margin trading service is registered. The auditor’s opinions in the latest audited annual financial statement or the latest examined financial statement must be unqualified opinions.
- The ratio of liabilities to owner’s equity does not exceed 3, owner’s equity is not lower than legal capital, and reserve funds are created sufficiently;
- Liquidity ratio accounts for at least 180% in the latest 12 consecutive months from the time of registration of margin trading service;
- There are a system for margin trading service, supervision of margin accounts; a system of management of separate investors’ deposits for securities transactions at the bank; and a process of service and risk management, and control of margin trading.
This Decree shall take effect from 01/7/2016, any branches of foreign banks in Vietnam obtained a certification of securities depository services, registered as depository members of VSD before effective date of the Law on Securities dated 29/6/2006 is entitled to be a securities depository member.
In case a securities trader has its business type converted into a single-member limited liability company before the effective date of this Decree is exempt from regulations on proportion of shareholders, capital contributors regulated in this Decree.
Le Thi Tuyet Anh
(Source: Agency for Business Registration)