Circular No. 117/2020/TT-BTC provides methods for calculating unlawful revenue and illegal gains resulting from violations of securities and securities market laws.

 

CIRCULAR

REGULATIONS ON THE METHOD OF CALCULATING ILLEGAL REVENUE AND UNLAWFUL PROFITS OBTAINED FROM IMPLEMENTING VIOLATIONS OF SECURITIES AND THE SECURITIES MARKET LAWS

On the basis of Securities Law dated November 26, 2019;

On the basis of Law on Handling Administrative Violations dated June 20, 2012;

Decree No. Decree No. 81/2013/NĐ-CP dated July 19, 2013 of the Government detailing certain provisions and measures for implementing the Law on Handling Administrative Violations; Decree No. 97/2017/NĐ-CP dated August 18, 2017 of the Government amending and supplementing certain provisions of Decree No. 81/2013/NĐ-CP dated July 19, 2013 of the Government detailing certain provisions and measures for implementing the Law on Handling Administrative Violations;

Decree No. Decree No. 156/2020/NĐ-CP dated December 31, 2020 of the Government stipulating administrative penalties in the field of securities and the securities market;

Decree No. Decree No. 87/2017/NĐ-CP dated July 26, 2017 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

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

The Minister of Finance issues this Circular regulating the method of calculating illegal revenue and unlawful profits obtained from implementing violations of securities and the securities market laws.

PART I
GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular regulates the method of calculating illegal revenue and unlawful profits obtained from implementing violations of securities and the securities market laws.

Article 2. Applicability

1. Individuals and organizations that commit acts violating the provisions of Decree No. 156/2020/NĐ-CP dated December 31, 2020 of the Government stipulating administrative penalties in the field of securities and the securities market (hereinafter referred to as Decree No. 156/2020/NĐ-CP).

2. Persons authorized to impose administrative penalties in the field of securities and the securities market as prescribed in Article 47 of Decree No. 156/2020/NĐ-CP.

3. Persons authorized to prepare administrative violation reports as prescribed in Article 48 of Decree No. 156/2020/NĐ-CP.

4. Individuals and organizations related to the imposition of administrative penalties in the field of securities and the securities market.

Chapter II
METHODS FOR CALCULATING ILLEGAL REVENUE AND UNLAWFUL PROFITS OBTAINED FROM IMPLEMENTING VIOLATIONS OF SECURITIES AND THE SECURITIES MARKET LAWS

Article 3. Principles and methods for calculating illegal revenue obtained from manipulating the securities market and using insider information to buy and sell securities

1. Illegal revenue as defined in Article 132 of the Securities Law is the profit obtained by organizations and individuals from manipulating the securities market and using insider information to buy and sell securities, after deducting taxes and fees payable. Taxes and fees payable shall be provided and confirmed by the securities company.

2. Principles for determining illegal revenue:

a) Illegal revenue is determined from the time the violation act begins until it ends;

b) The period of market manipulation is the stage during which the violator manipulates the securities market and is recorded in the administrative violation report. The period of using insider information to buy and sell securities is the stage during which the violator uses insider information to buy and sell securities and is recorded in the administrative violation report. The number of accounts involved in market manipulation or using insider information to buy and sell securities is determined in the administrative violation report;

c) In cases where organizations or individuals commit multiple violation acts, illegal revenue obtained shall be calculated separately for each violation act;

d) In cases where organizations or individuals repeatedly commit violation acts, illegal revenue obtained shall be calculated separately for each violation instance;

đ) In cases where organizations or individuals commit violation acts involving multiple security codes, illegal revenue shall be calculated separately for each security code;

e) In cases where an organization or individual uses multiple accounts to manipulate the securities market or use insider information to buy and sell securities, illegal revenue shall be calculated based on the total transactions of the accounts used for the violation acts after deducting intra-group transactions among the accounts (if any). Intra-group transactions are transactions between accounts that do not result in actual transfer of ownership or ownership merely circulates among accounts within the group;

g) In cases where a group of organizations or individuals or a group of organizations and individuals manipulates the securities market or uses insider information to buy and sell securities, illegal revenue shall be calculated based on the total transactions of the accounts used for the violation acts after deducting intra-group transactions among the accounts (if any);

In cases where it is not possible to determine illegal revenue for each violating organization or individual, illegal revenue shall be evenly distributed among each violating organization or individual;

h) Based on the administrative violation report regarding market manipulation or using insider information to buy and sell securities, the head of the inspection team or the head of the verification team is responsible for calculating and preparing a report on the calculation of illegal revenue for the Chairman of the State Securities Commission to consider and decide;

In cases where there is illegal revenue from market manipulation or using insider information to buy and sell securities, the Chairman of the State Securities Commission establishes a committee to calculate illegal revenue. The composition of the committee to calculate illegal revenue is decided by the Chairman of the State Securities Commission. The Chairman of the State Securities Commission may seek advice from experts from the Ministry of Finance, securities-related social-professional organizations, police agencies, and other relevant agencies, organizations, and individuals;

3. Illegal revenue obtained from market manipulation is calculated according to the following formula:

Illegal revenue = (Average selling price - Average buying price) x (Volume of securities sold - Volume of intra-group transactions) - Taxes and fees payable.

a) Average selling price = (Value of securities sold - Value of intra-group transactions) / (Volume of securities sold - Volume of intra-group transactions):

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

Average Purchase Price = (Value of Securities Purchased - Value of Intra-group Securities Transactions) / (Volume of Securities Purchased - Volume of Intra-group Securities Transactions).

c) In cases where the total volume of securities sold exceeds the total volume of securities purchased during the period of market manipulation, the average purchase price shall be calculated as follows:

Average Purchase Price = (Value of Securities Purchased + Value of Excess Securities - Value of Intra-group Securities Transactions) / (Volume of Securities Purchased + Volume of Excess Securities - Volume of Intra-group Securities Transactions). Wherein:

Volume of Excess Securities = Volume of Securities Sold - Volume of Securities Purchased.

Value of Excess Securities = Volume of Excess Securities x Price of Excess Securities Volume.

The price of excess securities volume is the reference price on the start date of the market manipulation period.

Illegal gains before the price adjustment date and illegal gains after the price adjustment are calculated according to the formula provided in this clause. For cases where the total volume of securities sold exceeds the total volume of securities purchased after the price adjustment, the price of excess securities volume specified in point c of this clause is the reference price on the non-dividend distribution date.

4. Illegal gains obtained from implementing market manipulation activities in cases where market manipulation causes stock prices to decrease and then purchases are made shall be calculated using the following formula:

Illegal Gains = (Average Selling Price - Average Purchase Price) x (Volume of Securities Purchased - Volume of Intra-group Securities Transactions) - Taxes and Fees Due. Wherein the average selling price is determined according to the provisions at point a of Clause 3 of this Article, and the average purchase price is determined according to the provisions at point b of Clause 3 of this Article.

In cases where there is a price adjustment for securities during the market manipulation period, illegal gains shall be calculated as the sum of illegal gains before the price adjustment date (non-dividend distribution date) and illegal gains after the price adjustment. Illegal gains in each period are calculated according to the formula provided in this clause.

5. Method for calculating illegal gains obtained from using insider information to buy or sell securities:

a) In cases where insider information is disclosed causing the price of securities to increase, illegal gains shall be calculated based on the difference between the average selling price and the average purchase price multiplied by the total volume of securities sold within 30 days from the date of disclosure of insider information, after deducting taxes and fees due. The period for calculating the average purchase price is from when the violator uses insider information to purchase securities until the date of disclosure of insider information.

b) In cases where insider information is disclosed causing the price of securities to decrease, illegal gains shall be calculated based on the difference between the average selling price and the average closing price over 10 consecutive trading days from the date of disclosure of insider information, multiplied by the total volume of securities sold, after deducting taxes and fees due. The period for calculating the average selling price is from when the violator uses insider information to sell securities until the date of disclosure of insider information.

The date of disclosure of insider information is the date when the information appears on one of the information dissemination channels as prescribed in the Circular of the Minister of Finance guiding the disclosure of information on the securities market.

Article 4. Principles and methods for calculating the amount of illegal gains obtained from implementing acts violating securities and securities market laws

1. The amount of illegal gains obtained from implementing acts violating securities and securities market laws, as defined in point d, Clause 3, Article 4 of Decree No. 156/2020/ND-CP, includes the total amount of money, securities, assets, and valuable items that organizations and individuals obtain from such violations after deducting taxes and fees payable.

2. Principles for determining the amount of illegal gains:

a) In cases where organizations and individuals commit multiple violations, the amount of illegal gains shall be determined separately for each violation.

b) In cases where organizations and individuals repeatedly commit violations, the amount of illegal gains shall be determined separately for each occurrence.

c) In cases where organizations and individuals violate regulations concerning multiple stock codes, the amount of illegal gains shall be calculated separately for each stock code.

3. Methods for calculating the amount of illegal gains:

a) The amount of illegal gains obtained from selling shares purchased back, as stipulated in point d, Clause 2, Article 16 of Decree No. 156/2020/ND-CP, shall be calculated using the following formula:

Illegal gains = Number of shares sold x (Average selling price per share - Average purchase price per share) - Taxes and fees payable.

Where:

Average selling price per share = Total transaction value of sales / Total number of shares sold.

Average purchase price per share = Total transaction value of purchases / Total number of shares repurchased.

b) The amount of illegal gains obtained from exploiting knowledge of public tender offers to trade securities for oneself or providing information, inciting, or encouraging others to trade securities before the official announcement of the public tender offer, as stipulated in Clause 4, Article 17 of Decree No. 156/2020/ND-CP, shall be calculated according to the method for determining unlawful income obtained from trading securities using insider information, as provided in Clause 5, Article 3 of this Circular.

c) The amount of illegal gains obtained from organizing securities trading markets contrary to the provisions of Clause 2, Article 42 of the Securities Law and Clause 1, Article 20 of Decree No. 156/2020/ND-CP, is the entire amount of benefits that organizations and individuals derive from organizing locations or forms of information exchange to aggregate buy and sell orders and conduct securities transactions.

d) The amount of illegal gains obtained from leasing or transferring licenses, as stipulated in point b, Clause 4, Article 24 of Decree No. 156/2020/ND-CP, and from leasing securities practice certificates, as stipulated in point a, Clause 4, Article 32 of Decree No. 156/2020/ND-CP, is the amount of benefits that organizations and individuals derive from leasing or transferring licenses and leasing securities practice certificates, which is determined based on contracts or agreements between the leasing/transferring parties and the leasing/receiving parties.

đ) The amount of illegal gains obtained from lending accounts to others for securities trading or holding securities on behalf of others, leading to market manipulation, as stipulated in Clause 1, Article 34 of Decree No. 156/2020/ND-CP, is the amount of benefits that organizations and individuals derive from lending accounts for securities trading or holding securities on behalf of others, which is determined based on contracts or agreements between the account borrowers and lenders, and between those who entrust holdings and those who hold on their behalf.

e) The amount of illegal gains obtained from violating foreign ownership ratio regulations, as stipulated in point a, Clause 2, Article 34 of Decree No. 156/2020/ND-CP, is the entire amount of money, securities, and other benefits arising from securities exceeding the foreign ownership ratio.

g) The amount of illegal gains obtained from violating regulations on the transfer of privately placed securities, as stipulated in Clause 3, Article 34 of Decree No. 156/2020/ND-CP, shall be calculated using the following formula:

Illegal gains = Number of shares transferred x (Average selling price per share - Average purchase price per share) - Taxes and fees payable.

Where:

Average selling price per share = Total transaction value of sales of transferred shares / Total number of transferred shares.

Average purchase price per share = Total transaction value of purchases / Total number of shares purchased.

- For organizations and individuals conducting one or more transactions to conceal true ownership information about a security to evade disclosure obligations under regulations or obligations in conducting public tender offers or foreign ownership ratio requirements in the Vietnamese securities market, the amount of illegal gains derived from such violations is the entire amount of money, securities, and other benefits arising from concealed securities.

- For organizations and individuals conducting one or more transactions to assist others in concealing true ownership information about a security to evade disclosure obligations under regulations or obligations in conducting public tender offers or foreign ownership ratio requirements in the Vietnamese securities market, the amount of illegal gains derived from such violations is determined based on contracts or agreements among the parties involved.

i) The amount of unlawful profit obtained from implementing the act of using the assets of the securities investment fund, of the securities investment company, of the entrusted investor not in accordance with the provisions of Clause 4, Article 40 of Decree No. 156/2020/NĐ-CP is the entire profit that the depositary bank has obtained from using the assets of the securities investment fund, of the securities investment company, of the entrusted investor not in accordance with the provisions of the law.

Chapter III
IMPLEMENTING PROVISIONS

Article 5. Implementation Provisions

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

2. This Circular replaces Circular No. 217/2013/TT-BTC dated December 31, 2013 of the Minister of Finance guiding the implementation of administrative penalties in the field of securities and the securities market and Circular No. 36/2017/TT-BTC dated April 27, 2017 of the Minister of Finance amending and supplementing some articles of Circular No. 217/2013/TT-BTC dated December 31, 2013 of the Minister of Finance guiding the implementation of administrative penalties in the field of securities and the securities market.

3. When the referenced documents for application in this Circular are amended, supplemented, or replaced by new documents, they shall be applied according to the amended, supplemented, or replacing documents.

4. During the course of implementation, if any difficulties arise, it is requested that relevant agencies, organizations, and units promptly reflect them to the Ministry of Finance for consideration and resolution./.