Circular No. 74/2011/TT-BTC guiding securities transactions

CIRCULAR

Guidelines on Securities Transactions

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Based on the Securities Law number 70/2006/QH11 adopted by the National Assembly on 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;

The Ministry of Finance issues guidelines for securities transactions on the securities market as follows:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular guides the trading activities of listed companies, registered trading companies, and public securities investment funds on the Stock Exchange (SE).

Article 2. Explanation of terms

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1. Trading members are securities companies approved by the SE to become trading members.

2. Trading system is the computer system used for securities trading activities at the SE.

3. Order transmission system is the system that transfers investors' trading orders from trading members to the SE.

4. Price fluctuation range is the limit of price fluctuation of securities within a trading day, calculated as a percentage (%) relative to the reference price.

5. Reference price is the basis for the SE to calculate the price fluctuation range of securities within a trading day.

6. Matching method is the trading method implemented by the trading system based on matching buy and sell orders of securities. The matching method includes periodic matching and continuous matching.

7. Negotiation method is the trading method where trading members negotiate with each other regarding trading conditions and enter the information into the system to record the trading results.

8. Margin purchase of securities is the transaction where customers purchase securities using loans from securities companies and collateralize other securities in their account and securities purchased with borrowed money.

9. Insider information is information related to public companies or public funds that has not been disclosed but if disclosed could significantly affect the stock prices of such public companies or public funds.

10. Insider trading is a transaction that uses insider information to buy or sell securities to gain benefits (profit or avoid, reduce loss) for the person conducting the transaction, the person who knows the insider information, or a third party.

11. Market manipulation is the act of one or more individuals or organizations implementing, either directly or indirectly, placing orders, trading, or disseminating information to create artificial supply, demand, liquidity, or price movements for one or more types of securities.

Chapter II

SPECIFIC PROVISIONS

Article 3. Securities Trading Organization

1. The SE organizes securities trading through the matching method and negotiation method. The matching method on the trading system operates according to the priority principle of price and time.

2. The SE organizes trading of listed and registered securities on the SE through its trading system, except for the following cases:

a) Cases stipulated in Point b Clause 1 Article 4 Circular 43/2010/TT-BTC dated March 25, 2010, issued by the Minister of Finance amending and supplementing the Registration, Custody, Settlement, and Payment Rules for Securities promulgated together with Decision No. 87/2007/QĐ-BTC dated October 22, 2007, issued by the Minister of Finance.

b) Auction sale of state-owned shares in listed companies, public companies;

c) Other transfer cases through the Securities Depository Center (SDC) after approval by the State Securities Commission (SSC).

3. The SE issues Trading Rules after approval by the SSC. The Trading Rules specify details about: Trading hours; Trading methods; Method of determining the reference price; Price fluctuation range of securities; Types of trading orders; Order modification and cancellation procedures, and other relevant contents.

4. The Hanoi SE can organize trading of listed securities and securities of public companies not listed on the SE, except for the cases stipulated in Points a, b, and c Clause 2 of this Article.

5. The SDC assigns security codes for securities traded on the SE.

Article 4. Suspension of Securities Trading

1. The SE temporarily suspends trading activities across the entire system in the following cases:

a) Technical problems occur in the trading system or order transmission system of the SE;

b) Unforeseen events such as natural disasters or fires that affect market trading activities;

c) The SSC requests suspension of trading to stabilize the market;

d) Other situations deemed necessary by the SE to protect investor interests after obtaining SSC approval.

2. Suspension of trading for specific types of securities is carried out according to the SE's Trading Rules.

3. The SE must report to the SSC immediately upon deciding to suspend trading as stipulated in Point a, b Clause 1 and Clause 2 of this Article.

Article 5. Price Fluctuation Range

1. The SE sets the price fluctuation range after obtaining SSC approval;

2. In cases deemed necessary to ensure market stability, the SSC decides to adjust the price fluctuation range.

Article 6. Correcting errors after transactions, establishing transactions, and canceling transactions

1. The Securities Trading Commission shall be responsible for issuing the procedures to guide correcting errors after transactions for listed securities and securities traded on the Stock Exchange after being approved by the Securities Commission.

2. The Stock Exchange shall be responsible for issuing regulations regarding the establishment and cancellation of securities transactions after being approved by the Securities Commission.

Article 7. Securities Transactions of Investors

Investors must open a securities trading account with a securities company to conduct securities transactions on the Stock Exchange and bear responsibility for providing complete and accurate information when opening a trading account.

Investors are only permitted to open one trading account at each securities company, except in the following cases:

a) An investor's margin trading account;

b) A fund management company must open separate trading accounts for itself and each investment securities fund managed by the fund management company at each securities company where the fund management company opens an account, and this must be specified in the account opening contract. In the case of managing a portfolio, the fund management company must open two (02) trading accounts in the name of the fund management company at the securities company acting on behalf of the entrusted investor, including one (01) account for domestic entrusted investors and one (01) account for foreign entrusted investors.

c) Foreign investors who are foreign securities companies established under foreign laws may open separate securities trading accounts at securities companies to manage securities owned by the company (proprietary) and customer accounts (brokerage) of the foreign securities company.

d) A wholly foreign-owned insurance company operating in Vietnam, when participating in securities transactions, must open two (02) trading accounts at a securities company: one (01) account for investment from its own capital and subject to foreign ownership ratio restrictions, and one (01) account for investment from insurance premium income and not subject to foreign ownership ratio restrictions.

3. The opening of securities trading accounts by securities practitioners shall be carried out in accordance with Clause 2 of Article 81 of the Securities Law.

4. In the case where an investor opens a securities trading account at different securities companies, the application for opening an account at a new securities company must clearly state the number of previously opened accounts and the account numbers at those securities companies.

5. Foreign investors may only open a trading account after registering and having the Securities Trading Commission issue a securities trading code.

6. The Securities Commission shall provide guidelines for the issuance of trading account codes for investors. The securities company where the investor opens an account has the responsibility to retain information about the account holder, securities transaction information, and related documents for a minimum of ten years from the date of the transaction.

7. Investors must ensure that the margin requirement is met with either cash or securities in the transaction. The Securities Commission shall provide guidelines for the margin requirement with cash or securities after approval by the Ministry of Finance.

8. The transfer of listed or registered securities transactions must be conducted through the Stock Exchange. The cases of transfer mentioned in Clause 2 of Article 3 of this Circular shall be carried out through the Securities Trading Commission and must be announced on the Stock Exchange.

9. Securities companies must purchase odd-lot shares or fund certificates from investors at agreed prices or organize odd-lot trading for customers according to the guidance of the Securities Commission.

Article 8. Securities transactions on the trading day:

1. Investors may carry out opposite-direction transactions (buying, selling) of the same type of securities on the trading day if they meet the following conditions:

a) Using one account opened at one securities company to execute both buy and sell orders;

b) Only allowed to buy (or sell) one type of security if the previous sell (or buy) order for the same type of security has been executed, and the transaction order must comply with the margin requirement stipulated in Clause 7, Article 7 of this Circular.

c) The securities company and depositary bank are responsible for verifying the validity of the investor's buy/sell orders.

2. Investors are not permitted:

a) To carry out transactions that do not result in a change in ownership of securities;

b) To simultaneously place buy and sell orders for the same type of security in each matching session on the same account or different accounts under their name.

Article 9. Authorized Trading Accounts

1. When opening a securities trading account, investors may be authorized to trade in the following cases:

a) Authorizing a securities company or depositary bank to execute trades on their behalf through a written authorization. Upon being authorized to trade, the securities company/depositary bank acts on behalf of the investor to execute trades and must comply with regulations on securities trading, settlement, information disclosure obligations, and bear responsibility towards the investor regarding the content of the authorization;

b) Authorizing another individual to execute trades on their behalf through a written authorization, which must ensure:

- Confirmation of the authorization from local authorities or notarization as prescribed by law;

- The power of attorney contract must clearly specify the scope of authorization;

- The authorized person shall not conduct transactions with themselves or with third parties who are also authorized.

2. Securities company employees are not permitted to accept authorizations from investors.

3. Investors who open multiple securities trading accounts must report their significant shareholder obligations across all accounts and disclose information as required by law.

Article 10. Trading of Treasury Shares

1. Listed organizations and organizations registered for trading may repurchase and sell treasury shares on the Stock Exchange in accordance with the provisions of the law. The Stock Exchange issues detailed rules on trading treasury shares after approval by the State Securities Commission.

2. In the case of selling treasury shares, public companies must report to the State Securities Commission at least seven (07) days before the transaction date.

3. Listed organizations and organizations registered for trading may purchase odd-lot shares from investors to hold as treasury shares. Purchases of odd-lot shares by listed organizations and organizations registered for trading must ensure the source of funds for purchasing treasury shares in compliance with the law and are not subject to restrictions on the sale period of odd-lot shares purchased as treasury shares.

Article 11. Margin Securities Trading

1. Securities companies may engage in margin trading after reporting to the State Securities Commission.

2. Investors wishing to engage in margin trading must open a margin trading account at the securities company where they have opened a securities trading account. At each securities company where the investor opens a trading account, the investor is only allowed to open one (01) margin trading account. Securities companies must manage the investor's margin trading account separately from other trading accounts.

3. Securities eligible for margin trading include listed stocks and investment fund certificates that meet the requirements for marginable securities as stipulated by the State Securities Commission. Securities companies are obligated to publicly disclose the list of securities they trade on margin.

4. Securities companies are required to periodically report and report upon request about margin trading activities to the State Securities Commission, Stock Exchange, and Central Depository Corporation.

5. In necessary circumstances, to ensure the safety of the securities market operations, the State Securities Commission may require securities companies to temporarily suspend margin trading.

6. The State Securities Commission specifies detailed procedures for margin trading for securities companies.

Article 12. Cases of securities being managed

The Stock Exchange shall specify in detail the conditions, measures, and timeframes for applying measures to cases of securities traded on the Stock Exchange that are subject to warning, control, suspension of trading, and cessation of trading after approval by the Securities Commission.

Article 13. Prohibited transactions

1. Prohibited transactions include: insider trading, market manipulation, and other prohibited transactions as prescribed by law;

2. Violations related to securities transactions shall be handled in accordance with the provisions of the law.

Article 14. Reporting and Supervision System

1. The Stock Exchange and the Securities Trading Center shall implement a reporting system on the status of securities transactions to the Securities Commission.

2. The Stock Exchange and the Securities Trading Center are subject to supervision by the Securities Commission regarding securities transactions.

Chapter III

IMPLEMENTATION

Article 15. Implementation Provisions

1. The Securities Commission is responsible for issuing specific guidelines. The Stock Exchanges and the Securities Trading Centers are responsible for issuing regulations, operational procedures, and supervising compliance with member trading activities after approval by the Securities Commission.

This Circular takes effect from August 1, 2011.

3. Any amendments or supplements to this Circular shall be decided by the Minister of Finance.