Decision No. 126/2008/QD-BTC Amending and Supplementing Certain Articles of the "Regulation on the Organization and Operation of Securities Companies" issued together with Decision No. 27/2007/QD-BTC dated April 24, 2007, of the Minister of Finance.

Pursuant to …;

Amending and supplementing certain articles of the "Regulation on the organization and operation of securities companies" issued together with Decision No. 27/2007/QĐ-BTC dated April 24, 2007 of the Minister of Finance.

________________________________________

THE MINISTER OF FINANCE

Pursuant to the Securities Law dated June 29, 2006;

Pursuant to Decree No. 14/2007/NĐ-CP dated January 19, 2007 of the Government detailing the implementation of certain provisions of the Securities Law;

Pursuant to Decree No. 118/2008/NĐ-CP dated November 27, 2008, 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,

DECISION:

Article 1. Amending and supplementing certain articles of the "Regulation on the organization and operation of securities companies" issued together with Decision No. 27/2007/QĐ-BTC dated April 24, 2007 of the Minister of Finance, as follows:

1. Amend Clause 4 of Article 3 as follows:

“4. Conditions for individuals contributing capital:

a) Individuals who are founding shareholders or founding members must meet the conditions stipulated in Clause 2 of Article 62 of the Securities Law;

b) Only their own capital may be used to contribute capital, they shall not use borrowed capital or entrusted investment capital from other organizations or individuals.

c) Individuals participating in capital contribution must prove their ability to contribute capital through money, securities, or other assets. The value of money, securities, or other assets used to prove financial capacity must be at least equal to the amount of capital intended to be contributed to the securities company. The latest date for confirming the value of money, securities, or other assets to prove financial capacity shall not exceed thirty (30) days from the date when the application for establishing the securities company is complete and valid.

For monetary assets, there must be confirmation from the bank regarding the balance of Vietnamese dong or freely convertible foreign currency in the bank account.

For securities assets, the securities must be listed on the Stock Exchange or Securities Trading Center and there must be confirmation from the securities company or the issuer regarding the number of securities. The principle for determining the price of securities is the closing price on the day of confirming the value of the securities.

For other assets, there must be documentation proving ownership and the asset must be appraised by a legally operating valuation organization in Vietnam.

Assets used to prove the financial capacity of shareholders or contributors shall not be in a state of pledge, mortgage, deposit, guarantee, or margin, or be involved in disputes, or be used to prove financial capacity in other enterprises or for other purposes.”

2. Amend Clause 5 of Article 3 as follows:

“5. Conditions for legal entities:

a) Legally operating; having a minimum operating period of five (05) years;

b) A securities company established in the form of a joint-stock company or a limited liability company with two or more members must have at least two (02) founding shareholders or founding members as organizations, including at least one (01) organization being a commercial bank, finance company, or insurance company.

The proportion of shareholding or capital contribution of founding shareholders or founding members as organizations must be at least sixty-five percent (65%) of the charter capital, of which the proportion of shareholding of founding shareholders or founding members as commercial banks, finance companies, or insurance companies must reach at least thirty percent (30%) of the charter capital of the securities company.

c) For a securities company established in the form of a single-member limited liability company, the owner must be a commercial bank, finance company, or insurance company.

d) The source of capital contribution of legal entities must be legitimate and confirmed by an independent auditing organization, and shall not use entrusted capital from other organizations or individuals to contribute capital.

đ) In the most recent audited annual financial report and in the most recent audited financial report up to the nearest point in time (but not exceeding ninety (90) days from the date when the application for establishing the securities company is complete and valid), the organization participating in capital contribution must meet the following conditions:

- Net equity after deducting incentive funds, welfare funds, and long-term assets must be at least equal to the amount of capital intended to be contributed to the securities company.

In case the legal entity is an insurance company: net equity plus idle funds from insurance reserves after deducting long-term assets must be at least equal to the amount of capital intended to be contributed to the securities company.

In case the legal entity is a commercial bank or finance company: registered capital plus Supplementary Capital Reserve Fund after deducting long-term assets must be at least equal to the amount of capital intended to be contributed to the securities company.

- Minimum net current assets must be equal to the amount of capital contribution.

- Legal entities engaged in business operations must have been profitable for two (02) consecutive years prior to the year of applying for permission to establish a securities company and must not have accumulated losses up to the date when the application for establishing the securities company is complete and valid;

e) Insurance companies, commercial banks, or finance companies participating in the establishment of a securities company must ensure continuous compliance with and meet the requirements for capital safety and other financial conditions as prescribed by specialized laws.”

3. Amend Clause 6 of Article 3 as follows:

“6. Founding shareholders or founding members of a securities company shall not transfer their initial shares or capital contributions within three (03) years from the date of issuance of the license for establishment and operation, except in cases where the transfer is to another founding shareholder or founding member, in which case commercial banks, finance companies, or insurance companies must always hold at least thirty percent (30%) of the charter capital of the securities company.”

4. Amend Point g of Clause 1 of Article 4 as follows:

“g) Documentation proving the financial capacity and sources of capital contribution of shareholders or contributors specifically as follows:

- For individuals: documents as stipulated in Clause 1 of Article 1 of this Decision.

- For legal entities: the most recent audited annual financial report up to the date when the application is complete and valid and confirmed by an independent auditing organization that is legally operating. Legal entities with subsidiaries, joint ventures, or associated companies must submit consolidated annual financial reports for the most recent year that have been audited.

If more than ninety (90) days have passed since the end of the fiscal year, legal entities must submit the most recent quarterly financial report that has been audited up to the date when the application is complete and valid.

The audit opinion on the financial reports must fully approve.”

5. Amend Clause 1 of Article 5 as follows:

“1. After receiving the dossier in accordance with Article 4 of this Regulation, within thirty (30) days, the State Securities Commission shall examine and approve in principle the issuance of the license for the establishment and operation of a securities company. In cases where clarification of issues related to the application dossier for the license for the establishment and operation of a securities company is required, the State Securities Commission has the right to request representatives among the founding shareholders or members, or the person expected to be appointed or hired as the General Director (Chairman) of the securities company, to explain directly or in writing.

Within thirty (30) days from the date the State Securities Commission requests in writing, the founding shareholders and members of the securities company must supplement and complete the dossier. If the founding shareholders and members fail to supplement and complete the dossier fully after this period, the State Securities Commission will not continue to examine the dossier.

6. Amend Clause 2 of Article 5 as follows:

“2. Within six (06) months from the date of approval in principle, the organization applying for the license for the establishment and operation of a securities company must complete the investment in technical infrastructure, prepare sufficient securities practitioners, and freeze the statutory capital. The State Securities Commission will inspect the technical facilities at the headquarters of the securities company before officially issuing the license for establishment and operation. If the requirements are not completed within the prescribed time, the approval in principle shall be deemed revoked.

7. Amend Clause 3 of Article 5 as follows:

“3. The statutory capital must be deposited into a frozen account at a bank designated by the State Securities Commission and must have confirmation from the bank regarding the amount on the frozen account. This capital may only be unfrozen and transferred to the securities company's account after the State Securities Commission officially issues the license for establishment and operation.

8. Amend Clause 6 of Article 5 as follows:

“6. In case there is any change related to the contributed capital and the structure of founding shareholders or members in the application dossier for the license for establishment and operation from the date of approval in principle until the official commencement of operations, the approval in principle shall be deemed revoked.

9. Delete Article 11 on Agents Receiving Orders.

10. Add Clause 5 to Article 29 as follows:

“5. A securities company shall not lend in any form to major shareholders, members of the Supervisory Board, members of the Board of Directors, members of the Board of Members, members of the Management Board, and persons associated with the aforementioned entities.

Article 2. Within one (01) year from the effective date of this Decision, securities companies that have established agents receiving orders must carry out procedures to terminate such agents and report to the State Securities Commission five (05) working days prior to the cessation of operations of the agent, accompanied by a liquidation contract record.

Article 3. This Decision takes effect fifteen (15) days from the date of publication in the Official Gazette.

Article 4. The Head of the Ministry’s Office, the Chairman of the State Securities Commission, heads of relevant units, securities companies, and related parties are responsible for implementing this Decision./.”