Consolidated Document number 37/VBHN-BTC Decree stipulates conditions for investment and securities trading

Circular [1]

Article 1 provides for the method of calculating unlawful revenue and illegal gains obtained from implementing violations of securities and securities market laws.

Circular No. 117/2020/TT-BTC dated October 31, 2020, issued by the Minister of Finance, stipulates the method of calculating unlawful revenue and illegal gains obtained from implementing violations of securities and securities market laws, which took effect on February 15, 2021, and was amended and supplemented by:

Circular No. 73/2023/TT-BTC dated October 19, 2023, issued by the Minister of Finance, amends and supplements certain provisions of Circular No. 117/2020/TT-BTC dated October 31, 2020, issued by the Minister of Finance, concerning the method of calculating unlawful revenue and illegal gains obtained from implementing violations of securities and securities market laws, which took effect on February 5, 2024.

Pursuant to the Securities Law promulgated on November 26, 2019;

Pursuant to the Law on Handling Administrative Offenses dated June 20, 2012;

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

Pursuant to Decree No. 156/NĐ-CP dated December 31, 2020, issued by the Government, providing for administrative sanctions in the field of securities and the securities market;

Pursuant to Decree No. 87/2017/NĐ-CP dated July 26, 2017, issued by 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 to stipulate the method of calculating unlawful revenue and illegal gains obtained from implementing violations of securities and securities market laws.[2].

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 of violation as prescribed in Decree No. 156/2020/NĐ-CP dated December 31, 2020, issued by the Government, providing for administrative sanctions 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. Unlawful revenue as provided for in Article 132 of the Securities Law is the profit that organizations and individuals obtain from committing market manipulation acts or 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 phase during which the violator commits market manipulation acts and is recorded in the Administrative Violation Record. The period of using insider information to buy and sell securities is the phase during which the violator uses insider information to buy and sell securities, as recorded in the Administrative Violation Record, with the number of accounts participating in committing market manipulation acts or using insider information to buy and sell securities being determined in the Administrative Violation Record;

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 commit market manipulation acts or use insider information to buy and sell securities, unlawful revenue is calculated based on the total transactions of the accounts used to commit the violations, after deducting intra-group transactions between the accounts (if any). Intra-group transactions refer to transactions between accounts that do not result in actual transfer of ownership rights or ownership rights merely circulate among accounts within the group.

g) In cases where a group of organizations or individuals or a group of organizations and individuals commits market manipulation acts or uses insider information to buy and sell securities, unlawful revenue is calculated based on the total transactions of the accounts used to commit the violations, after deducting intra-group transactions between 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 Record for market manipulation acts or using insider information to buy and sell securities, the Head of the Inspection Team or the Head of the Examination Team is responsible for calculating and preparing a Report on the calculation of unlawful revenue for the Chairman of the State Securities Commission to consider and decide.

In cases where there is unlawful revenue from market manipulation acts or using insider information to buy and sell securities, the Chairman of the State Securities Commission establishes a Committee to calculate unlawful revenue. The composition of the Committee to calculate unlawful 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, public security agencies, and other relevant agencies, organizations, and individuals.

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

Unlawful 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 Buying Price = (Value of Securities Purchased + Value of Securities Difference - Value of Intra-Group Transactions) / (Volume of Securities Purchased + Volume of Securities Difference - Volume of Intra-Group 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.

d)[3] Unlawful revenue in cases where there is a price adjustment during the period of market manipulation is calculated as the sum of unlawful revenue in the periods before the price adjustment (non-cumulative trading day) and unlawful revenue in the period after the price adjustment.

Illegal revenues obtained during the period before the price adjustment date and illegal revenues obtained during the period after the price adjustment shall be calculated according to the formula prescribed in this clause. In cases where the total volume of securities sold exceeds the total volume of securities purchased during the period after the price adjustment, the purchase price of the excess securities volume specified in point c of this clause shall be the average purchase price during the period prior to the trading day without rights adjusted according to the following formula:

P ’=(P+P_a *a-C)/(1+a+b)

Where:

P’: the price of the excess volume of securities specified in Point c of this Clause.

P: the average purchase price of shares in the period before the trading day without rights.

"5. The pre-tax weighted average cost of capital i (%) is determined according to the formula below:_a: the issue price of additional shares for preferential subscription rights.

a: the ratio of additional shares issued for preferential subscription rights.

b: the ratio of share distribution to increase capital from retained earnings.

C: cash dividend.

4. Illegal revenues obtained from manipulating the securities market by selling stocks at reduced prices and then buying them back shall be calculated according to the following formula:

Illegal revenues = (Average selling price - Average purchase price) x (Volume of securities purchased - Volume of securities traded within the group) - Taxes and fees payable. The average selling price is determined according to point a of Clause 3 of this Article, and the average purchase price is determined according to point b of Clause 3 of this Article.

In cases where there is a price adjustment for securities during the period of market manipulation, illegal revenues shall be calculated as the sum of illegal revenues obtained during the period before the price adjustment date (the trading day without rights) and illegal revenues obtained during the period after the price adjustment. Illegal revenues in each period shall be calculated according to the formula prescribed in this clause.

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

a) Where insider information is disclosed causing the securities price to increase, illegal revenues shall be based on the difference between the average selling price and the average purchase price multiplied by the total volume of securities sold within thirty days from the date of disclosure of insider information, minus taxes and fees payable. 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) Where insider information is disclosed causing the securities price to decrease, illegal revenues shall be based on the difference between the average selling price and the ten-day closing price average from the date of disclosure of insider information multiplied by the total volume of securities sold, minus taxes and fees payable. 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 such information appears on one of the means of disseminating information as prescribed in the Circular of the Minister of Finance guiding the dissemination 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 unlawful gains obtained from violating securities laws and regulations as stipulated in point d, Clause 3, Article 4 of Decree No. 156/2020/ND-CP includes money, negotiable instruments, assets, and valuable items that organizations and individuals obtain through violations of securities laws and regulations, after deducting taxes and fees payable.

2. Principles for determining the amount of illegal gains:

a) Where organizations or individuals commit multiple violations, the amount of unlawful gains obtained shall be determined separately for each violation.

b) Where organizations or individuals repeatedly commit violations, the amount of unlawful gains obtained from each violation shall be determined separately for each instance.

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:

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

Where:

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

Average purchase price of shares = Total transaction value of purchases / Total number of shares purchased:

b) The amount of unlawful gains obtained from taking advantage of knowledge of public tender offers to trade securities for oneself or providing information, inciting, or enticing others to trade securities before the officially announced 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 illegal revenues obtained from using insider information to trade securities as prescribed in Clause 5, Article 3 of this Circular.

c) The amount of unlawful 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 profit obtained from organizing locations or forms of information exchange to aggregate buy and sell orders and conduct securities transactions.

d) The amount of unlawful 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 trading certificates as stipulated in point a, Clause 4, Article 32 of Decree No. 156/2020/ND-CP is the profit obtained from leasing or transferring licenses, leasing securities trading certificates, which is determined based on contracts or agreements between the lessor/transferrer and the lessee/receiver.

đ) The amount of unlawful 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 profit obtained from lending accounts for securities trading or holding securities on behalf of others, which is determined based on contracts or agreements between the account borrower and lender, and between the person seeking proxy ownership and the proxy owner.

e) The amount of unlawful 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 money, securities, and other benefits arising from 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 of shares = Total transaction value of purchases / Total number of shares purchased:

h)|||[4] The amount of unlawful gains obtained from implementing acts to conceal information about true ownership of one or more securities to evade or assist others in evading the obligation to disclose information or public tender offers or regulations on foreign ownership ratios in the Vietnamese securities market as stipulated in Clause 4, Article 34 of Decree No. 156/2020/ND-CP amended and supplemented pursuant to Clause 28, Article 1 of Decree No. 128/2021/ND-CP dated December 30, 2021 of the Government amending and supplementing certain provisions of Decree No. 156/2020/ND-CP shall be calculated as follows:

- For organizations and individuals who implement acts to conceal information about true ownership of one or more securities to evade the obligation to disclose information as prescribed or the obligation to comply with public tender offers or regulations on foreign ownership ratios in the Vietnamese securities market, the amount of unlawful gains obtained from such violations is the entire amount of money, securities, and other benefits arising from the concealed securities.

- For organizations and individuals who implement acts to assist others in concealing information about true ownership of one or more securities to evade the obligation to disclose information or public tender offers or regulations on foreign ownership ratios in the Vietnamese securities market, the amount of unlawful gains obtained from such violations is the entire amount of money, securities, and benefits related to these amounts of money and securities arising from the violations, determined based on contracts or agreements between the parties.

i) The amount of unlawful gains obtained from implementing acts to use assets of a securities investment fund, a securities investment company, or a entrusted investor in violation of the law as stipulated in Clause 4, Article 40 of Decree No. 156/2020/ND-CP is the entire profit that the depository bank obtains from using the assets of the securities investment fund, the securities investment company, or the entrusted investor in violation of the law.

Chapter III

IMPLEMENTING PROVISIONS [5]

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./.

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[1] This consolidated document is derived from the following two Circulars:

Circular No. 117/2020/TT-BTC dated October 31, 2020 of the Minister of Finance stipulates the method for calculating illegal revenue and unlawful gains obtained from implementing acts violating laws on securities and the securities market, which takes effect from February 15, 2021.

Circular No. 73/2023/TT-BTC dated October 19, 2023, issued by the Minister of Finance, amends and supplements certain provisions of Circular No. 117/2020/TT-BTC dated October 31, 2020, issued by the Minister of Finance, concerning the method of calculating unlawful revenue and illegal gains obtained from implementing violations of securities and securities market laws, which took effect on February 5, 2024.

This Consolidated Document does not replace the above two Circulars.

[2] Circular No. 73/2023/TT-BTC is based on the following grounds:

Pursuant to the Securities Law promulgated on November 26, 2019;

Pursuant to the Law on Handling Administrative Violations dated June 20, 2012; the Law Amending and Supplementing Certain Provisions of the Law on Handling Administrative Violations dated November 13, 2020;

Pursuant to Decree No. 118/2021/NĐ-CP dated December 23, 2021, issued by the Government, detailing certain provisions and measures to implement the Law on Handling Administrative Violations;

Pursuant to Decree No. 156/2020/ND-CP dated December 31, 2020 of the Government stipulating administrative penalties in the field of securities and the securities market; Decree No. 128/2021/ND-CP dated December 30, 2021 of the Government amending and supplementing certain provisions of Decree No. 156/2020/ND-CP dated December 31, 2020 of the Government stipulating administrative penalties in the field of securities and the securities market;

Pursuant to Decree No. 14/2023/NĐ-CP dated April 20, 2023, issued by 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 to amend and supplement some articles of Circular No. 117/2020/TT-BTC dated December 31, 2020 of the Minister of Finance stipulating the method for calculating illegal revenue and unlawful gains obtained from implementing acts violating laws on securities and the securities market.

[3] This clause is amended and supplemented according to the provisions of Clause 1, Article 1 of Circular No. 73/2023/TT-BTC, taking effect from February 5, 2024.

[4] This clause is amended and supplemented according to the provisions of Clause 2, Article 1 of Circular No. 73/2023/TT-BTC, taking effect from February 5, 2024.

[5] Article 2 of Circular No. 73/2023/TT-BTC provides as follows:

"Article 2. Implementation Provisions

1. This Circular takes effect from February 5, 2024.

2. For violations that occur before the effective date of this Circular but are discovered or are under consideration for administrative penalty decisions or measures to address consequences when this Circular becomes effective, this Circular shall be applied if it provides a lesser legal liability.

3. During implementation, any difficulties should be promptly reported to the Ministry of Finance for review and resolution.”