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Official Gazette

Saturday, September 23, 2017

Draft circular imposes stricter rules on securities companies

Updated: 14:41’ - 25/03/2015

The State Securities Commission is gathering public comments on a draft circular to replace Circular 210/2012/TT-BTC on November 30, 2012, setting out more stringent regulations on fundraising and lending activities of securities companies.

Regarding fundraising, the draft says that a securities company might only be allowed to mobilize capital through borrowing from credit institutions or from its shareholders, capital contributors or owner after obtaining approval from the Shareholders’ General Meeting, Board of Directors or owner. It might also raise funds through trading in government bonds, issuance of securities through private placements and public offerings or borrowing of subordinated debts so as to supplement its liquidity capital according to regulations on financial prudence.

Hence, if the draft is approved, securities companies would not be banned from mobilizing capital from all other organizations or individuals in any forms, even through the signing of tripartite cooperation arrangements, capital assignment agreements or other economic contracts which, by nature, are loan agreements.

The draft also provides tighter regulations on securities firms’ use of their clients’ deposits for securities trading, saying that such amounts would only be used to pay for the transactions concerned through bank transfer to securities sellers’ accounts. Meanwhile, sums deposited by their clients under securities brokerage contracts would be used only to clear against the obligations of depositors, which arise due to failure to perform such contracts.

Regarding lending activities, securities companies would not be allowed to lend money or securities in any forms. Exceptions are margin lending or securities lending conducted to fix transaction mistakes and lending activities serving exchange-traded fund transactions. Securities firms would also be banned from lending money or expending capital to their major shareholders; members of the Supervisory Board, Board of Directors, Members’ Council or Executive Board, chief accountants and other managers appointed by the Board of Directors and their affiliated persons, except for depositing money at credit institutions and investing in bonds in accordance with law.-

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