Circular No. 188/2013/TT-BTC guiding the financial management regime and assessment of operational efficiency for Securities Exchanges and Securities Depositories.

CIRCULAR

Guidelines on financial management and assessment of operational efficiency

for Securities Exchanges and Securities Depositories

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BASED ON THE SECURITIES LAW NUMBER 70/2006/QH11 OF JUNE 29, 2006;

Pursuant to Law No. 62/2010/QH12 dated November 24, 2010 amending and supplementing certain articles of the Securities Law No. 70/2006/QH11 dated June 29, 2006;

Pursuant to the 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;

Pursuant to Decree No. 71/2013/NĐ-CP dated July 11, 2013 of the Government on investment of state capital in enterprises and financial management of enterprises wholly owned by the state;

Pursuant to Decree No. 61/2013/NĐ-CP dated June 25, 2013 of the Government on the issuance of Financial Supervision Regulations and Operational Efficiency Assessment and Financial Information Disclosure for State-owned Enterprises and Enterprises with State Capital;

Implementing the directive of the Prime Minister in Circular No. 8590/VPCP-KTTH dated October 15, 2013 of the Government Office regarding the Charter on Organization, Operation, Financial Mechanism, and Operational Efficiency Assessment for the Ho Chi Minh City Securities Exchange, Hanoi Securities Exchange, and Vietnam Securities Depository;

At the proposal of the Director of the Department of Financial Affairs of Banks and Financial Institutions,

The Minister of Finance issues this Circular guiding the financial management regime and operational efficiency assessment for Securities Exchanges and Securities Depositories.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

Article 1. This Circular stipulates the financial management regime and operational efficiency assessment for the Ho Chi Minh City Securities Exchange, Hanoi Securities Exchange (hereinafter referred to as Securities Exchanges), and the Vietnam Securities Depository (hereinafter referred to as Securities Depository).

Article 2. Securities Exchanges and Securities Depositories shall be responsible for implementing the financial management regime and operational efficiency assessment as prescribed in this Circular and in accordance with the laws on financial management regime and operational efficiency assessment for enterprises wholly owned by the State. In case of any discrepancy, Securities Exchanges and Securities Depositories shall implement according to the provisions of this Circular.

Article 2. Applicability

Chapter 1. Securities Exchanges and Securities Depositories.

Chapter 2. Owners of Securities Exchanges and Securities Depositories.

3. Organizations and individuals related thereto.

Chapter II

MANAGEMENT OF CAPITAL AND ASSETS

Article 3. Registered Capital

Point 1. Registered capital is determined as the necessary capital that the owner commits to invest in Securities Exchanges and Securities Depositories to fulfill assigned tasks.

Point 2. Registered capital is specified in the Charter on Organization and Operation of Securities Exchanges and Securities Depositories.

Point 3. During the course of operation, when there is a need to increase registered capital, Securities Exchanges and Securities Depositories shall base their plans on objectives, tasks, development strategies, and sources of additional registered capital to submit for approval by the owner in accordance with the law. The methods, procedures, formalities, and authority for increasing registered capital of Securities Exchanges and Securities Depositories shall be carried out in accordance with the financial management regime for enterprises wholly owned by the State.

Point 4. Securities Exchanges and Securities Depositories shall not reduce registered capital during the course of operation.

Article 4. Raised Capital

Clause 1. Securities Exchanges and Securities Depositories may raise capital in accordance with the law to develop securities market infrastructure and information technology.

Clause 2. The raising of capital must ensure compliance with the following principles:

Point a. Ensuring effectiveness, debt repayment capability, and not altering ownership form.

Point b. Adhering to regulations on raising capital under the financial management regime for enterprises wholly owned by the State.

Point c. The capital-raising plan must be approved by the Board of Directors after obtaining the owner's consent.

Article 5. Investment of Capital Abroad

1. The Securities Exchange and the Securities Depository Center may only invest or contribute capital abroad related to the development of infrastructure and information technology for the securities market.

2. Principles, forms, and limits on investment of capital abroad shall be implemented according to the financial management regime for state-owned enterprises holding 100% of the charter capital.

3. The Board of Directors shall decide on investment of capital abroad after obtaining approval from the owner.

Article 6. Management and Use of Capital and Assets

1. The Securities Exchange and the Securities Depository Center are responsible for managing and using effectively all capital and assets invested by the owner and other lawful sources of capital according to the financial management regime for state-owned enterprises holding 100% of the charter capital.

2. The Board of Directors shall seek written approval from the owner before deciding on projects for investment, construction, purchase of fixed assets; buying and selling of assets; leasing, lending out, mortgaging, pledging of assets; selling off, liquidating assets after:

a) Projects for investment, construction, purchase of fixed assets; buying and selling of assets; leasing, lending out, mortgaging, pledging of assets; selling off, liquidating assets with a value equal to or greater than 30% of the charter capital of the Securities Exchange and the Securities Depository Center.

b) Infrastructure and information technology investment projects that change the organizational model of trading, registration, and settlement of securities transactions in the securities market.

3. Procedures and formalities for investment, construction, purchase of fixed assets; buying and selling of assets; leasing of assets shall be carried out according to the financial management regime for state-owned enterprises holding 100% of the charter capital.

4. Asset management includes depreciation of fixed assets, inventory of assets, revaluation of assets, mortgaging, pledging of assets, liquidation, sale of fixed assets; management of receivables, payables, exchange rate differences shall be carried out according to the financial management regime for state-owned enterprises holding 100% of the charter capital.

Article 7. Management of the Settlement Support Fund

1. For the Settlement Support Fund established pursuant to Article 58 of the Securities Law No. 70/2006/QH11, the Securities Depository Center shall be responsible for monitoring and accounting separately from the capital and assets of the unit.

2. The Board of Directors of the Securities Depository Center shall be responsible for promulgating regulations on the management and use of the Settlement Support Fund in accordance with laws on securities and the securities market.

Chapter III

MANAGEMENT OF REVENUE AND EXPENSES

Article 8. Revenue and Other Income

1. Revenue from business activities:

a) For the Securities Exchange including:

- Fees for managing trading members;

- Listing fees; annual listing management fees;

- Securities trading fees; online connection fees; terminal equipment usage fees;

- Bond auction fees; stock auction fees;

- Other business activity fees;

b) For the Securities Depository Center including:

- Fees for managing depositary members;

- Securities registration fees;

- Securities deposit fees;

- Securities transfer fees;

- Exercise right fees; post-trade error correction fees;

- Securities ownership transfer fees outside the Securities Exchange's trading system;

- Bond principal and interest payment agency fees;

- Other business activity fees.

2. Revenue from service provision activities

a) For the Securities Exchange including:

- Fees from information provision services;

- Fees from asset, equipment, software rental services;

- Other service supply revenue.

b) For the Securities Depository Center including:

- Fees from information provision services;

- Fees from asset, equipment, software rental services;

- Other service supply fees.

3. Financial Activity Revenue

a) Financial activity revenue shall be implemented according to the financial regime for state-owned enterprises holding 100% of the charter capital.

b) Interest income arising from proxy dividend, principal, and bond interest payments, or from stock auction activities.

4. Other income shall be implemented according to the financial regime for state-owned enterprises holding 100% of the charter capital.

Article 9. Principles for Determining Revenue

The Securities Trading Corporation and the Securities Depository Center shall determine revenue in accordance with accounting standards on revenue and current tax laws.

Article 10. Costs

In addition to expenses that are recognized as costs related to operations under the provisions of the law applicable to state-owned enterprises holding 100% of the charter capital, the Securities Trading Corporation and the Securities Depository Center are allowed to deduct certain specific expenses from their corporate income tax as follows:

1. For the Securities Trading Corporation:

a) Expenses for establishing a compensation fund for securities companies that are trading members in cases where the Securities Trading Corporation causes damage to trading members, except in cases of force majeure as stipulated in Clause 6, Article 38 of the Securities Law No. 70/2006/QH11. The annual contribution rate to the fund must be at least 2% and at most 5% of the revenue from securities trading fees until the balance of the fund equals 5% of the actual paid-in charter capital at the same time, then no further contributions will be made. The Board of Directors decides the specific annual contribution rate based on the financial income and expenditure situation to ensure compliance with the prescribed ratio. The use of the compensation fund shall be carried out in accordance with the laws on securities and the securities market. If not fully utilized in the fiscal year, the remaining balance of the fund can be transferred to the next year for continued use.

b) Supervision costs transferred to the State Securities Commission in accordance with the law.

2. For the Securities Depository Center:

a) Expenses for establishing a risk prevention fund for business operations to compensate customers for losses due to technical failures or employee errors during operations, as stipulated in Clause 7, Article 46 of the Securities Law No. 70/2006/QH11. The annual contribution rate to the fund must be at least 2% and at most 5% of the revenue from securities deposit fees until the balance of the fund equals 5% of the actual paid-in charter capital at the same time, then no further contributions will be made. The Board of Directors decides the specific annual contribution rate based on the financial income and expenditure situation to ensure compliance with the prescribed ratio. The use of the risk prevention fund for business operations shall be carried out in accordance with the laws on securities and the securities market. If not fully utilized in the fiscal year, the remaining balance of the fund can be transferred to the next year for continued use.

b) Costs transferred back to the Securities Trading Corporation from the revenue from securities trading transfer fees that do not go through the Securities Trading Corporation's trading system, as stipulated by law.

c) Supervision costs transferred to the State Securities Commission in accordance with the law.

Article 11. Principles for Recording and Managing Expenses

1. The expenses of the Securities Trading Corporation and the Securities Depository Center are those incurred during the period related to the operations of the Securities Trading Corporation and the Securities Depository Center, supported by valid invoices and receipts. The determination of expenses shall be carried out in accordance with accounting standards and current tax laws.

2. The Securities Trading Corporation and the Securities Depository Center shall manage expenses in accordance with Article 37 of Decree No. 71/2013/NĐ-CP dated July 11, 2013, issued by the Government on state investment in enterprises and financial management for state-owned enterprises holding 100% of the charter capital.

Chapter IV

DISTRIBUTION OF PROFITS, ALLOCATION AND USE OF FUNDS

Article 12. Distribution of Profits

The realized profits of the Securities Exchange and the Securities Depository Center, after covering previous year losses according to the Law on Corporate Income Tax, setting aside funds for scientific and technological development as prescribed by law, paying corporate income tax, and the remaining profit shall be distributed as follows:

1. Covering the losses of previous years that have exceeded the period allowed for deduction from pre-tax profit.

2. The remaining profit shall be distributed as follows:

a) Setting up the investment development fund: The amount set aside shall be carried out according to the financial regime applicable to state-owned enterprises holding 100% of the charter capital.

b) Setting up the reward and welfare fund: The amount set aside for the reward and welfare fund shall be based on the classification of activities of the Securities Exchange and the Securities Depository Center.

- The amount set aside for the reward and welfare fund shall be carried out according to the financial regime applicable to state-owned enterprises holding 100% of the charter capital.

- The classification of activities of the Securities Exchange and the Securities Depository Center shall be carried out according to the provisions of Article 20 of this Circular.

c) Setting up the fund for rewarding enterprise management officials: The amount set aside for the fund for rewarding enterprise management officials shall be based on the classification of activities of the Securities Exchange and the Securities Depository Center.

- The amount set aside for the fund for rewarding enterprise management officials shall be carried out according to the financial regime applicable to state-owned enterprises holding 100% of the charter capital.

- The classification of enterprise management officials shall be carried out according to the provisions of Article 21 of this Circular.

d) The remaining profit after setting up the funds as prescribed in Points a, b, and c of Clause 2 of this Article shall be handled as follows:

- Supplementing the investment development fund to increase the charter capital until the Securities Exchange and the Securities Depository Center reach the approved level of charter capital.

- Transferring to the Enterprise Restructuring and Development Support Fund after the Securities Exchange and the Securities Depository Center have been invested with the approved level of charter capital; the procedures for transferring shall be carried out according to the financial regime applicable to state-owned enterprises holding 100% of the charter capital.

Article 13. Authority and Purpose of Using Funds

The authority to decide and the purpose of using funds shall be carried out according to the financial regime applicable to state-owned enterprises holding 100% of the charter capital.

Chapter V

FINANCIAL PLAN, ACCOUNTING AND AUDITING REGIME

Article 14. Financial Plan

1. Based on the medium and long-term strategy and plans approved by the owner, market conditions, and annual activity plans, the Securities Exchange and the Securities Depository Center shall develop an annual financial plan to submit to the Board of Directors for decision.

2. The Board of Directors shall seek the owner's opinion on the annual financial plan before officially approving it.

3. The annual financial plan shall include the following main contents:

a) Financial plan indicators and explanations according to Appendix 1 attached to this Circular.

b) Detailed financial plan of the planning year according to Appendices 1a and 1b attached to this Circular.

4. Deadline and place for submitting the financial plan:

a) Annually, before December 15, the Board of Directors shall report to the owner the next year's financial plan.

b) After receiving the owner's formal written opinion, the Board of Directors shall approve the financial plan for the Securities Exchange and the Securities Depository Center to base their implementation on.

c) Within the latest 10 working days from the date of issuance, the Board of Directors of the Securities Exchange and the Securities Depository Center shall report to the owner the approved financial plan for monitoring and management.

Article 15. Accounting and Statistics

1. The Stock Exchange Authority and the Securities Depository Center shall implement accounting and statistical systems in accordance with current laws, reflecting fully, promptly, truthfully, accurately, and objectively all financial activities.

2. The fiscal year begins on January 1 and ends on December 31 of the Gregorian calendar.

Article 16. Financial Reports and Other Reports

1. At the end of each accounting period (quarterly or annually), the Stock Exchange Authority and the Securities Depository Center must prepare, present, and submit financial reports and statistical reports as prescribed by law. The Board of Directors shall be responsible for the accuracy and truthfulness of these reports.

2. The Stock Exchange Authority and the Securities Depository Center shall prepare and submit the following reports:

a) Financial reports including quarterly financial reports and annual financial reports as prescribed by law for enterprises wholly owned by the State.

b) Reports on changes in capital sources and capital utilization; reports on capital raising and external investment (if any); reports on asset utilization (these reports shall be attached to the financial reports).

c) Classification reports on the results of operations of the Stock Exchange Authority and the Securities Depository Center as stipulated in Article 20 of this Circular.

d) Monitoring reports on financial conditions as prescribed in Clause 3, Article 9 of the Financial Supervision Regulation and Assessment of Operational Efficiency and Public Disclosure of Financial Information for Enterprises Wholly Owned by the State and Enterprises with State Capital issued together with Decree No. 61/2013/NĐ-CP dated June 25, 2013 of the Government.

3. Time Limit for Submission of Reports

a) The deadline for submitting quarterly financial reports is no later than 30 days from the end of the quarter. If the last day of the submission deadline falls on a public holiday, Tet holiday, or weekend, the latest date for submitting the financial report is the next working day immediately following that day.

b) The deadline for submitting audited annual financial reports is no later than 90 days from the end of the annual accounting period and as prescribed in Clause 2, Article 17 of this Circular.

c) The deadline for submitting classification reports on operational results is no later than April 30 each year.

4. Recipients of Reports

The reports prescribed in Clause 2 of this Article shall be submitted to the Ministry of Finance for management in accordance with the provisions of the law.

5. In case the Ministry of Finance requests, the Stock Exchange Authority and the Securities Depository Center must prepare and submit ad hoc reports as required.

Article 17. Audit and Public Disclosure of Financial Reports

1. Annual financial reports of the Stock Exchange Authority and the Securities Depository Center must be audited by independent auditing organizations.

2. Within no more than 15 working days from the date of audit results, the Stock Exchange Authority and the Securities Depository Center must submit the audited financial reports to the Ministry of Finance.

3. The Stock Exchange Authority and the Securities Depository Center shall implement financial disclosure in accordance with Articles 27 and 28 of the Financial Supervision Regulation and Assessment of Operational Efficiency and Public Disclosure of Financial Information for Enterprises Wholly Owned by the State and Enterprises with State Capital issued together with Decree No. 61/2013/NĐ-CP dated June 25, 2013 of the Government.

Chapter VI

ASSESSMENT OF OPERATIONAL EFFICIENCY

Article 18. Indicators for assessing operational effectiveness

1. The Securities Exchange and the Securities Depository Center shall use the following indicators to assess operational effectiveness:

a) Indicator 1: Revenue and other income.

b) Indicator 2: Realized profit and the realized profit margin on equity.

c) Indicator 3: Overdue payable debt and ability to pay maturing debt.

d) Indicator 4: Compliance with regulations on systems and policies under the law.

đ) Indicator 5: Operational activity indicator:

- For the Securities Exchange, it is the number of listed securities and average transactions carried out in the year being evaluated.

- For the Securities Depository Center, it is the number of registered and deposited securities and the average transactions carried out in the year being evaluated.

2. Methods for determining the indicators:

a) The methods for determining the indicators specified in Points a, b, c, and d of Clause 1 of this Article shall be implemented according to the mechanism for assessing the operational effectiveness of enterprises wholly owned by the State.

b) The method for determining the operational activity indicator specified in Point đ of Clause 1 of this Article shall be carried out according to Appendix 2 issued together with this Circular.

3. When calculating the indicators stipulated in Clause 1 of this Article, the Securities Exchange and the Securities Depository Center may exclude the following objective factors:

a) Objective factors prescribed in Point b of Clause 2 of Article 15 of Decree No. 61/2013/NĐ-CP dated June 25, 2013 of the Government.

b) State management policies that affect the listing and trading of securities and the registration, depositing, and settlement of securities on the securities market.

c) Fluctuations in the size of the securities market affecting the value of traded securities, bond auction prices for the Securities Exchange; the number of registered and deposited securities and the number of maturing securities for the Securities Depository Center.

Article 19. Principles and methods for evaluating operational effectiveness indicators

1. The evaluation and classification of the indicators specified in Points a, b, c, and d of Clause 1 of this Circular shall be conducted by comparing actual results with plans, goals, and tasks assigned by the owner. Evaluation and classification indicators must be registered in the first quarter of the planning year and cannot be adjusted during the implementation year.

2. The evaluation and classification of the operational activity indicator specified in Point đ of Clause 1 of Article 18 of this Circular shall compare the actual results of the evaluation year with those of the immediately preceding year.

3. The method for evaluating the indicators specified in Points a, b, c, and d of Clause 1 of this Circular shall be carried out according to the mechanism for assessing the operational effectiveness of enterprises wholly owned by the State. Specifically, for the evaluation of overdue payable debt, the Securities Exchange and the Securities Depository Center are permitted to exclude debts of investors resulting from proxy services provided to investors.

4. Method for evaluating the operational activity indicator (Indicator 5):

a) For the Securities Exchange:

- If the number of listed and traded securities averaged over the evaluation year is higher than the number of listed and traded securities averaged over the immediately preceding year: classified as A.

- If the number of listed and traded securities averaged over the evaluation year is equal to the number of listed and traded securities averaged over the immediately preceding year: classified as B.

- If the number of listed and traded securities averaged over the evaluation year is lower than the number of listed and traded securities averaged over the immediately preceding year: classified as C.

b) For the Securities Depository Center:

- If the number of registered and deposited securities averaged over the evaluation year is higher than the number of registered and deposited securities averaged over the immediately preceding year: classified as A.

- If the number of registered and deposited securities averaged over the evaluation year is equal to the number of registered and deposited securities averaged over the immediately preceding year: classified as B.

- If the number of registered and deposited securities averaged over the evaluation year is lower than the number of registered and deposited securities averaged over the immediately preceding year: classified as C.

Article 20. Classification of Operating Results

1. Annually, based on the indicators stipulated in Article 18 of this Circular and the principles and methods of evaluation prescribed in Article 19 of this Circular, the Securities Trading Department and the Securities Depository Center shall classify operating results as follows:

a) Class A when there are no indicators 1, 2, 3 classified as C, indicator 4 and indicator 5 classified as A.

b) Class C when indicator 5 is classified as C or two other indicators are classified as C (excluding indicator 2).

c) Class B when not classified as A or C.

2. The report on the classification of operating results must be submitted to the owner in accordance with Clause 3 of Article 16 of this Circular for the owner to provide comments in accordance with the regulations on evaluating efficiency and classifying enterprises for state-owned enterprises.

Article 21. Classification of Management Staff

The classification of management staff of the Securities Trading Department and the Securities Depository Center shall be carried out as follows:

1. Excellent completion of tasks when completing the following two criteria:

- Fulfilling well the assessment criteria for the performance of management staff according to the guidelines of the Ministry of Home Affairs.

- The enterprise is classified as A.

2. Failure to complete tasks if any of the following situations occur:

- Not fulfilling well the assessment criteria for the performance of management staff according to the guidelines of the Ministry of Home Affairs.

- The enterprise is classified as C.

3. Completion of tasks: all remaining cases.

Chapter VII

RESPONSIBILITIES OF RELATED AUTHORITIES

Article 22. Responsibilities of the Securities Trading Department and the Securities Depository Center.

1. Adhere to the financial management system as prescribed in this Circular and the financial management regulations for enterprises in which the State holds 100% of the charter capital.

2. Be subject to inspection, examination, and supervision by competent state agencies regarding the financial work of the Securities Trading Department and the Securities Depository Center in accordance with the provisions of the law.

3. The Securities Trading Department and the Securities Depository Center have the responsibility for internal oversight as follows:

a) Implement the reporting and public disclosure of financial information in accordance with the law for enterprises in which the State holds 100% of the charter capital.

b) Employee supervision: Employees supervise the implementation of policies and systems related to their interests and other supervisory functions as prescribed in current laws and regulations.

Article 23. Responsibilities of the Ministry of Finance

1. Perform the role of the owner for the Securities Trading Department and the Securities Depository Center in accordance with the provisions of the law.

2. Evaluate the implementation of financial management systems and policies and assess the operational effectiveness of the Securities Trading Department and the Securities Depository Center to improve the financial management system and assess the operational effectiveness of the Securities Trading Department and the Securities Depository Center.

Chapter VIII

IMPLEMENTATION

Article 24. Handling of Financial Reserve Fund Surplus

The surplus of the financial reserve fund of the Securities Trading Department and the Securities Depository Center up to the date this Circular takes effect shall be fully transferred into the development investment fund to supplement the charter capital.

Article 25. Effective Date

1. This Circular takes effect from February 1, 2014.

2. This Circular replaces Circular No. 29/2010/TT-BTC dated March 4, 2010 of the Ministry of Finance guiding the financial management mechanism for the Securities Trading Department and the Securities Depository Center.

3. In the process of implementing, if there are difficulties, the Securities Trading Department and the Securities Depository Center shall report to the Ministry of Finance for consideration and guidance./.