Decree No. 22/2000/ND-CP On Administrative Sanctions for Violations in the Securities and Securities Market Sector

DECREE

On administrative penalties for violations

 in the securities and securities market sector

_______________________

THE GOVERNMENT

Pursuant to the Government Organization Law dated September 30, 1992;

Pursuant to the Ordinance on Handling Administrative Violations dated July 6, 1995;

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

DECREE:

Chapter I

GENERAL PROVISIONS

Article 1. Scope and regulated subjects

1. Administrative violations in the securities and securities market sector are intentional or unintentional acts of individuals or organizations that violate state management regulations on securities and the securities market without reaching the level of criminal prosecution and according to other provisions of the law must be subject to administrative penalties.

2. Administrative violations in the securities and securities market sector include:

a) Violations of regulations on securities issuance activities;

b) Violations of regulations on securities trading;

c) Violations of regulations on securities business operations, registration, settlement, and custody;

d) Violations of reporting systems, information disclosure, and hindering inspection and supervision activities.

3. All domestic organizations and individuals committing administrative violations in the securities and securities market sector shall be punished under this Decree.

Foreign organizations and individuals committing administrative violations in the securities and securities market sector within the territory of the Socialist Republic of Vietnam shall also be subject to administrative penalties under this Decree, except where international treaties to which Vietnam is a party provide otherwise.

Article 2. Forms of punishment and additional measures

1. For each administrative violation in the securities and securities market sector, the violator organization or individual must be subject to one of two main forms of punishment:

Warning. This form is applied in cases of unintentional violations; minor first-time violations with mitigating circumstances.

Fine. The amount of the fine is determined based on the penalty range specified in this Decree. In cases of violations with mitigating circumstances, a lower fine may be applied, but not below the minimum limit of the penalty range. In cases of violations with aggravating circumstances, a higher fine may be applied, but not exceeding the maximum limit of the penalty range.

2. Depending on the nature and severity of the violation, individuals or organizations may also be subject to one or more supplementary forms of punishment as follows:

a) Revocation of the securities issuance license, securities business operation license, securities brokerage license for a limited or unlimited period;

b) Confiscation of all revenues from the implementation of the violations and related securities involved in illegal activities.

3. In addition to the forms of punishment prescribed in Clauses 1 and 2 of this Article, violator organizations and individuals may also be subject to one or more of the following measures:

a) Compelling restoration to the correct safety ratio as stipulated or to the initial state;

b) Compelling correction or cancellation of false or inaccurate information;

c) Compelling compensation for damages caused by administrative violations according to the law.

The supplementary forms of punishment and additional measures prescribed in Clauses 2 and 3 of this Article shall be applied when necessary, to thoroughly address violations, eliminate ongoing violation causes and conditions, and mitigate consequences caused by administrative violations in the securities and securities market sector.

Article 3. Time limit for punishment and time limit considered as not having been administratively penalized

1. The time limit for administrative punishment in the securities and securities market sector is two years, counted from the date the administrative violation was committed. If this period has passed, no punishment will be imposed, but measures compelling restoration to the initial state caused by the administrative violation can still be applied.

2. For individuals who commit violations concerning securities and the securities market and are subsequently indicted, prosecuted, or have a case decided to be brought to trial under criminal proceedings, if there is a decision to terminate the investigation or close the case, they will be subject to administrative punishment if they have committed administrative violations as stipulated in this Decree. The time limit for administrative punishment is three months from the date of the aforementioned termination decision.

3. Within the time limits prescribed in Clauses 1 and 2 of this Article, if an organization or individual commits new administrative violations regarding securities and the securities market activities or intentionally evades or obstructs punishment, the time limits prescribed in Clauses 1 and 2 of this Article will not apply.

4. Organizations and individuals subject to administrative punishment, if they do not reoffend within one year from the date of completion of the punishment decision or from the date the effectiveness of the punishment decision expires, shall be considered as not having been administratively penalized.

Chapter II

VIOLATIONS AND FORMS OF PUNISHMENT

PART 1

VIOLATIONS OF REGULATIONS

ON PUBLIC SECURITIES ISSUANCE

Article 4 Punishment for violations of public securities issuance regulations

1. A fine of VND 5,000,000 to VND 10,000,000 shall be imposed on any of the following violations:

a) Application materials for securities issuance submitted to the State Securities Commission contain misleading or concealed information;

b) Using information outside the prospectus to conduct market surveys before obtaining permission to issue securities;

c) Distributing securities before the issuance announcement is made;

d) Issuing securities not in accordance with the contents stated in the issuance permit regarding: quantity, type of securities, issuance period;

e) Announcing securities issuance on mass media not in accordance with the prescribed content and time, or registering issuance but not clearly disclosing information about voting rights, subscription rights, conversion rights, and other rights for shareholders and investors.

2. A fine of VND 10,000,000 to VND 20,000,000 shall be imposed on organizations and individuals participating in preparing application materials for public securities issuance (audit reports, asset evaluation reports, and commitment letters for issuance guarantees) containing falsified information in the application materials.

3. A fine of VND 20,000,000 to VND 50,000,000 shall be imposed on the act of issuing securities to the public without a permit.

4. Additional forms of administrative punishment:

a) Revocation of the securities issuance license for a period of 60 days in the case of violations as stipulated in Clause 1 of this Article;

b) Revocation of the securities issuance license indefinitely in the case of repeated violations as stipulated in Clause 1 or violations as stipulated in Clause 2 of this Article.

c) Confiscate all revenue from service fees of organizations and individuals who violate the provisions set forth in Clause 2 of this Article.

5. Apply other measures:

In case the issuer is subject to supplementary administrative penalties as stipulated at point a, b of Clause 4 of this Article, if investors request cancellation of purchase orders or return of securities purchased, the issuer must repurchase issued securities; refund the purchase price of securities, deposit money, and pay interest calculated at the non-term rate of the designated bank on the amount purchased or deposited within thirty days from the date of the decision to suspend issuance or revoke the issuance license.

PART 2

VIOLATIONS OF REGULATIONS ON SECURITIES TRADING

Article 5. Administrative penalties for violations of regulations on securities trading activities

1. Impose a fine of from twenty million to fifty million dong for one of the following violations:

a) Acting alone or colluding with others to simultaneously buy or sell a type of security with the aim of creating false supply, demand, or prices;

b) Conducting transactions to buy or sell securities without transferring ownership of such securities with the aim of changing the market price of that type of security;

c) Using or disclosing insider information to others to buy, place orders to buy, or sell, place orders to sell securities;

d) Creating and disseminating false information to change the price of securities and disrupt the securities market;

e) Continuously buying high-priced securities or selling low-priced securities to change the price of securities on the market;

g) Selling securities in any form when not owning them at the time of transaction;

h) Buying or selling listed securities outside the Securities Trading Center or Stock Exchange;

i) The issuer conducting buyback or resale of its own securities without permission from the State Securities Commission.

2. Additional forms of punishment:

a) Suspend the right to use the business license for securities trading for forty-five days, which may be extended by fifteen days in cases of violation of the provisions of Clause 1 of this Article; if the violation is not rectified within the said period, the right to use the business license for securities trading will be suspended indefinitely;

b) Confiscate all revenue from the implementation of administrative violations as stipulated in Clause 1 of this Article.

3. Apply other measures:

a) Compel restoration to the original state in cases of violation of provisions at points g, h, i of Clause 1 of this Article;

b) Compel compensation for losses suffered by investors in cases of violation of provisions at points a, b, c, e of Clause 1 of this Article.

Article 6. Administrative penalties for violations of regulations on protecting shareholders or acquiring enterprises

1. A fine of VND 5,000,000 to VND 10,000,000 shall be imposed on any of the following violations:

a) Organizations or individuals conducting transactions or buying and selling securities that change the holding of five percent or more of voting shares or no longer hold five percent or more of voting shares of the issuer without reporting to the Securities Trading Center or Stock Exchange within twenty-four hours;

b) Organizations, individuals, or related parties purchasing securities to hold over twenty-five percent of voting shares of an issuer without public auction as prescribed by the State Securities Commission;

c) Founding shareholders holding less than twenty percent of the capital stock of an issuer or the holding period has not reached the minimum three-year requirement from the end of the issuance period.

2. Impose a fine of from twenty million to fifty million dong on foreign organizations or individuals conducting transactions or purchasing securities to hold shares or bonds of an issuer exceeding the prescribed ratio under the law.

3. Apply other measures:

Compel restoration to the correct ratios as prescribed in cases of violation of point b, c of Clause 1 and Clause 2 of this Article.

PART 3

VIOLATIONS OF REGULATIONS ON BUSINESS OPERATIONS,

 REGISTRATION, NETTING PAYMENTS, AND SECURITIES DEPOSITORY

Article 7. Administrative penalties for violations of regulations on business licenses and securities services

1. A fine of VND 5,000,000 to VND 10,000,000 shall be imposed on any of the following violations:

a) Using names not in accordance with the provisions in the business license or representative office establishment permit granted;

b) Operating in violation of the charter or amendments to the charter without approval from the State Securities Commission;

c) Commencing operations before fulfilling all conditions as prescribed by law.

2. Impose a fine of from ten million to twenty million dong for one of the following violations:

a) Engaging in business or providing securities services without a license;

b) Lending, leasing, or transferring a license;

c) Engaging in business or providing securities services in areas not specified in the license or where the license has expired;

d) Altering, modifying the business license or branch establishment permit, representative office establishment permit;

e) Transferring or changing the headquarters, opening or closing branches, representative offices, or changing the General Manager or Deputy General Manager (Managing Director or Deputy Managing Director) of the securities business organization without approval from the State Securities Commission;

g) Splitting or merging with another securities business organization without approval from the State Securities Commission.

3. Additional forms of punishment:

a) Confiscate all revenue obtained in cases of violation of the provisions at points a, b, c of Clause 2 of this Article;

b) Suspend the right to use the business license for thirty days, which may be extended by fifteen days in cases of violation at point b of Clause 1; points b, c, d, e of Clause 2 of this Article;

Article 8. Administrative penalties for violations of regulations on the operation of securities business organizations

1. Impose a fine of from five million to ten million dong on securities companies for violating one of the following provisions:

a) Not maintaining sufficient available capital as prescribed by law;

b) Purchasing equipment and fixed assets exceeding fifty percent of the registered capital;

c) Investing more than twenty percent of the total outstanding securities of a listed organization;

d) Investing more than fifteen percent of the total outstanding securities of a non-listed organization;

e) The total value of issuance guarantees exceeds the ratio prescribed by law;

g) Establishing or using the additional capital reserve fund improperly as prescribed by law.

2. A fine of VND 5,000,000 to VND 10,000,000 shall be imposed on investment fund management companies for violating any of the following provisions:

a) Failing to maintain the required level of liquid assets as prescribed by law;

b) Investing more than 15% of the total value of securities issued by one issuer or investing more than 10% of the total assets of one fund in securities issued by one issuer;

c) Investing more than 49% of the total value of securities issued by one issuer or one non-listed entity;

d) Using the capital and assets of one fund to invest more than 10% of the equity of one non-listed entity or investing more than 5% of the total assets of one fund in one non-listed entity;

e) Investing more than 30% of the total assets of one fund in companies within the same group of companies that have interdependent ownership relationships;

g) Using the capital and assets of one fund to directly invest in real estate exceeding 10% of the value of that fund.

3. A fine of VND 10,000,000 to VND 20,000,000 shall be imposed on securities companies for violating any of the following provisions:

a) Buying, selling securities or using funds from customer accounts without customer authorization;

b) Failing to separate proprietary trading activities from brokerage services for customers.

4. A fine of VND 20,000,000 to VND 50,000,000 shall be imposed on securities companies and investment fund management companies for violating any of the following provisions:

a) Engaging in credit and securities lending activities;

b) Using the capital and assets of the securities investment fund to lend or guarantee;

c) Using the capital of this investment fund to invest in or purchase assets of another fund managed by itself.

5. Additional penalties:

a) Revoking the business operation license for a period of 30 days and may extend for an additional 15 days in case of repeated violations of the provisions in Clause 1, Clause 2, and Clause 3 of this Article;

b) Revoking the business operation license indefinitely in case of repeated violation of Clause 4 of this Article; Or, upon expiration of the period during which the business operation license was revoked, failing to remedy the consequences of the violation as stipulated in Clauses 1, Clause 2, and Clause 3 of this Article.

6. Other measures shall be applied

Compel restoration to the prescribed safety ratios for violations of the provisions in Clause 1 and Clause 2 of this Article.

Article 9. Punish violations concerning securities business practitioners

1. A fine of VND 5,000,000 to VND 10,000,000 shall be imposed on securities trading and service companies for violating any of the following acts:

a) Assigning individuals who do not have a practice permit to activities that require a practice permit as prescribed by the Securities Commission;

b) Failing to transfer or reassign personnel with practice permits whose permits have been revoked or required to be reassigned by the Securities Commission.

2. Revocation of the practice permit in the following cases:

a) Securities business practitioners simultaneously working or contributing capital to two or more securities companies; serving as director, member of the Board of Directors, or shareholder holding more than 5% of voting shares of an issuer; lending out their securities business practice permit;

b) Individuals with practice permits directly participating in short selling of securities not owned at the time of transaction; buying securities while the issuer has not publicly disclosed information; disseminating false information; engaging in credit and securities lending activities; participating in market manipulation and disruption activities.

Article 10. Sanctions for violations concerning the responsibilities of the Supervisory Bank

1. A fine of VND 5,000,000 to VND 10,000,000 shall be imposed on any of the following violations:

a) The Supervisory Bank improperly manages assets of the Investment Fund contrary to the fund's charter or fails to separate the assets of the Securities Investment Fund from other assets or the assets of this fund from those of another fund;

b) The Supervisory Bank improperly manages assets in violation of the management supervision contract signed with the Fund Management Company in securities investment.

2. Additional forms of punishment:

Suspend the use of the securities depositary license for a period of 30 days, which may be extended by an additional 15 days in case of violation of points a and b of Clause 1 of this Article; if the consequences of the violation are not remedied within that time limit, the right to use the license will be revoked indefinitely.

Article 11. Sanctions for violations concerning registration, settlement, and custody of securities

1. Impose a fine of between 5,000,000 VND and 10,000,000 VND on organizations engaged in registration, settlement, and custody of securities for any of the following violations:

a) Lending securities from customer accounts or using customer securities as collateral;

b) Violating regulations on the confirmation deadline for securities balances, transfer of ownership of securities, or correction and forgery of documents in securities transfer settlements causing material damage to customers;

c) Violating the regime for the safekeeping and retention of securities, or the retention of original documents related to registration, settlement, and custody of securities;

d) Failing to provide complete, accurate, and timely lists of security holders and related documents to the Issuing Company.

2. Additional forms of punishment

Confiscate all proceeds obtained from the implementation of the violation stipulated in point a of Clause 1 of this Article.

3. Apply other measures:

Compel compensation for damages in cases of violation stipulated in Clause 1 of this Article.

PART 4

VIOLATIONS OF REPORTING AND DISCLOSURE REGIMES

 AND OBSTRUCTION OF INSPECTION AND AUDIT ACTIVITIES

Article 12. Sanctions for violations concerning reporting regimes in securities trading activities

1. Issue a warning for any of the following violations:

Submitting incomplete reports; failing to submit reports within the prescribed time frame or according to the prescribed forms of the State Securities Commission;

2. Impose a fine of between 200,000 VND and 1,000,000 VND for repeated violations of Clause 1 of this Article.

3. Impose a fine of between 5,000,000 VND and 10,000,000 VND for any of the following violations:

Securities companies, Fund Management Companies, and Securities Custody Organizations cease securities trading operations without reporting or have reported but not received approval from the State Securities Commission;

Securities companies, Fund Management Companies, and Securities Custody Organizations fail to report or report untimely when extraordinary events occur that could significantly impact their financial capacity and business operations.

4. Additional forms of administrative punishment:

Suspend the use of the securities trading operation license for a period of 30 days, which may be extended by an additional 15 days in case of violation of points a and b of Clause 3 of this Article; if the violation is not remedied within that time limit, the right to use the securities trading operation license will be revoked indefinitely.

Article 13. Sanctions for violations concerning information disclosure

1. Impose a fine of between 5,000,000 VND and 20,000,000 VND for any of the following violations:

Providing incomplete, untimely, periodic, and non-compliant information as required by law;

Providing false information and reports;

Disclosing confidential data and documents that do not reach the level of criminal prosecution;

Announcing changes to previously disclosed important information without explanation and without reporting to the State Securities Commission, Stock Exchange Center, or Stock Exchange;

Announcing contradictory information or denying previously disclosed information.

2. Apply other measures:

a) Compel the removal or correction of false or inaccurate information;

b) Compel the organization responsible for information disclosure to compensate investors for losses caused by violations of information disclosure regulations.

Article 14. Sanctions for obstructing inspection, audit, or failing to implement recommendations of the Inspector

1. Issue a warning to issuers, securities traders, and individuals involved in securities activities for any of the following violations:

Delaying, evading, or opposing the provision of complete and timely documents, records, vouchers, and data as requested by the Inspection Organization, Inspection Team, or Inspector while performing duties;

2. Impose a fine of between 200,000 VND and 1,000,000 VND for repeated violations of Clause 1 of this Article.

3. Impose a fine of between 5,000,000 VND and 10,000,000 VND for any of the following violations:

a) Failing to implement decisions made by the Inspection Team;

b) Concealing, altering documents, records, ledgers, or evidence during an inspection;

c) Unauthorized removal, relocation, or other actions that alter the sealed condition of money, securities, ledgers, files, accounting vouchers, or other sealed items.

Chapter III

AUTHORITY AND PROCEDURES FOR ADMINISTRATIVE PENALTIES

Article 15. Competence to impose sanctions

1. Inspectors of the State Securities Commission have the authority:

a) To issue warnings;

b) To impose a fine up to two hundred thousand dong;

c) Compel restoration to the prescribed safety ratio or initial state;

d) Compel removal or correction of false or inaccurate information.

2. The Chief Inspector of the State Securities Commission has the authority:

a) To issue warnings;

b) To impose fines up to VND 20,000,000;

c) Suspend the use of securities issuance licenses, securities trading operation licenses, or securities trading profession licenses for a fixed or indefinite period;

d) Confiscate and turn over to public funds all proceeds obtained from illegal violations and related securities;

e) Compel restoration to the prescribed safety ratio or initial state;

g) Compel removal or correction of false or inaccurate information;

h) Compel compensation for administrative violations causing damage.

3. The Chairman of the People's Committee at the provincial level has the authority to impose administrative penalties within the scope of their management area for violations related to securities and the securities market as prescribed in this Decree, according to the authority defined in Article 28 of the Ordinance on Handling Administrative Violations.

Article 16. Delegation to impose penalties

In cases where those authorized to impose administrative penalties for violations related to securities and the securities market as stipulated in Clauses 2 and 3 of Article 15 of this Decree are absent or have delegated their authority, their deputies shall have the right to impose penalties within their respective authorities.

Article 17. Procedures for imposing administrative penalties

Procedures for imposing administrative penalties in the field of securities and the securities market shall be carried out in accordance with the provisions of the Ordinance on Handling Administrative Violations.

Article 18. Enforcement of penalty decisions and enforcement of compulsory measures for penalty decisions

1. Organizations and individuals subject to administrative penalties under this Decree must strictly comply with the penalty decision issued by the authority authorized to impose administrative penalties in the field of securities and the securities market. If they fail to comply with the penalty decision or intentionally evade compliance, they will be subject to compulsory enforcement pursuant to Article 55 of the Ordinance on Handling Administrative Violations.

Financial agencies, banks, public security forces, and local authorities at all levels shall cooperate to implement compulsory enforcement decisions issued by the authority authorized to impose administrative penalties in the field of securities and the securities market.

2. When applying compulsory enforcement measures for administrative penalty decisions, the agency and the authority must follow the procedures and formalities for compulsory enforcement as prescribed by law.

Chapter IV

PETITIONING, REPORTING AND HANDLING VIOLATIONS

Article 19. Complaints, accusations, and resolution of complaints and accusations

1. Organizations and individuals subject to administrative penalties or their legitimate representatives have the right to appeal against the penalty decision of the authority authorized to impose administrative penalties in accordance with the Law on Appeals and Complaints of 1998. During the period awaiting resolution of the appeal, organizations and individuals subject to penalties must still comply with the administrative penalty decision.

In cases where organizations and individuals who appeal are not satisfied with the decision resolving the appeal, they have the right to appeal to the next higher authority responsible for handling appeals or initiate an administrative lawsuit before the court in accordance with the law.

2. Individuals have the right to report to state agencies with authority about acts of administrative violations committed by organizations and individuals as prescribed in this Decree, in accordance with the Law on Appeals and Complaints of 1998.

3. Individuals have the right to report to state agencies with authority about illegal acts of the authority authorized to impose administrative penalties as prescribed in Article 15 of this Decree.

Article 20. Handling Violations

1. The authority authorized to impose administrative penalties in the field of securities and the securities market, if shielding, covering up for organizations and individuals who violate the law, failing to impose penalties, imposing penalties not in accordance with the law, or imposing penalties beyond the prescribed authority, shall be subject to disciplinary action or criminal liability depending on the nature and severity of the violation; if material damage is caused, compensation must be provided in accordance with the law.

2. If the person subject to a penalty engages in acts of resisting law enforcement officers, delaying, evading compliance, or committing other violations, they may be subject to administrative penalties or criminal liability depending on the nature and severity of the violation; if material damage is caused, compensation must be provided in accordance with the law.

Chapter V

IMPLEMENTING PROVISIONS

Article 21. Effectiveness

This Decree takes effect fifteen days from the date of signature.

Article 22. Guidance on Implementation and Responsibility for Enforcement

The Chairman of the State Securities Commission is responsible for providing detailed guidance on the implementation of this Decree.

Ministers of Ministries, Heads of agencies equivalent to Ministries, Heads of agencies under the Government, Chairmen of People's Committees of provinces and centrally governed cities are responsible for enforcing this Decree.