If a securities company in Vietnam fails to maintain its capital requirements, will its operation be suspended?
What are the requirements for issuing the securities trading license to a securities company in Vietnam?
According to the provisions of Article 74 of the 2019 Law on Securities in Vietnam on the requirements for issuing the securities trading license to a securities company as follows:
(1) Capital requirements include: The capital contributed shall be VND. The minimum charter capital for each operation of the securities company in Vietnam is prescribed in Article 175 of Decree No. 155/2020/ND-CP as follows:
Minimum charter capital
1. Minimum charter capital for securities business operations of securities companies in Vietnam:
a) Securities brokerage: 25 billion VND;
b) Proprietary trading: 50 billion VND;
c) Securities underwriting: 165 billion VND;
d) Securities investment counseling: 10 billion VND.
2. Minimum capital provided for the branch in Vietnam of a foreign securities company is 10 billion VND.
3. The minimum charter capital of a fund management company, minimum capital provided for the branch in Vietnam of a foreign fund management company is 25 billion VND.
4. In case an organization registers more than one operation, the minimum charter capital shall be the sum of the minimum charter capital of each operation registered.
(2) Requirements of shareholders and contributing members include:
- Shareholders and contributing members that are individuals are qualified for establishment and management of enterprises in Vietnam as prescribed by the Law on Enterprises;
- Shareholders and contributing members that are organizations shall be lawfully operating juridical persons that have profitable business in 02 years prior to the year in which the license is applied for; the latest annual financial statement has been audited and received unqualified opinions;
- Shareholders and contributing members holding at least 10% of charter capital of 01 securities company; their related persons (if any) do not hold more than 5% of charter capital of another securities company;
- Shareholders and contributing members that are foreign investors shall satisfy the requirements specified in Article 77 of the 2019 Law on Securities in Vietnam.
(3) Requirements of the structure of shareholders and contributing members include:
- At least 02 founding shareholders and contributing members shall be organizations. The owner of the securities company that is a single-member limited liability company shall be an insurer or commercial bank or foreign organization that satisfies the requirements specified in Clause 2 Article 77 of the 2019 Law on Securities in Vietnam.
- Total capital contributed by organizations shall be at least 65% of charter capital; capital contributed by insurers and commercial banks shall be at least 30% of charter capital.
(4) Infrastructural requirements:
- The premises are adequate for securities trading;
- Available equipment and technologies are adequate for securities trading processes.
(5) Personnel requirements:
There is a General Director (Director), at least 03 employees having suitable securities trading certifications for the licensed operations, and at least 01 employee in charge of compliance management. The General Director (Director) shall:
- Not be facing criminal prosecution, serving an imprisonment sentence or being banned from securities trading as prescribed by law;
- Have at least 02 years’ experience of working in specialized departments of finance, securities, banking, insurance organizations or in finance, accounting, investment departments of other organizations;
- Have the practising certificate for financial analysis or asset management;
- Not incur any administrative penalties for securities-related offences in the last 06 months prior to the application date.
The Deputy General Directors (Deputy Directors) in charge of specific operations shall satisfy the requirements specified in Points a, b, d of this Clause and have practising certificates suitable for their operation.
(6) A draft charter conformable with Clause 1 Article 80 of the 2019 Law on Securities in Vietnam.
If a securities company in Vietnam fails to maintain its capital requirements, will its operation be suspended?
How to handle in case the securities company cannot maintain the capital requirements?
According to the provisions of Article 85 of the 2019 Law on Securities in Vietnam as follows:
- Maintenance of fulfillment of requirements for issuance of the securities trading license:
+ Securities companies shall maintain fulfillment of the licensing requirements specified in Clause 1, Point c and Point d Clause 2, Clause 4 and Clause 5 Article 74 of the 2019 Law on Securities in Vietnam;
- Within 30 days from the day the requirements are no longer satisfied or the equity falls below the minimum charter capital, the Board of Directors, the Board of members or the owner of the securities company, fund management company, branch of the foreign securities company or fund management company shall approve the rectification plan and send a report to State Securities Commission.
The time limit for rectification shall be 06 months for equity and 03 months for other requirements from the day on which the requirements are no longer fulfilled.
- During the rectification period: a securities company must not: expand its business; distribute profit; repurchase shares except employees’ shares under the employees’ shares issuance regulations or for correction of transaction error.
If a securities company fails to maintain its capital requirements, will its operation be suspended?
According to the provisions of Point d, Clause 1 and Clause 2, Article 94 of the 2019 Law on Securities in Vietnam, the suspension of securities companies is as follows:
Suspension of securities companies, fund management companies, branches of foreign securities companies and foreign fund management company in Vietnam
1. State Securities Commission will suspend one, some or all of the operations of a securities company, fund management company, the branch of a foreign securities company or foreign fund management company in Vietnam in the following cases:
a) The application for issuance or revision of the securities trading license contains false information;
b) The issues mentioned in Article 92 of this Law are not resolved;
c) The company operates against the license;
d) The requirements specified in Clause 1 Article 85 of this Law or Clause 2 are not satisfied or the equity is still smaller than minimum charter capital after expiration of the time limit specified in Clause 2 Article 85 of this Law.
2. After 06 months from the effective date of the suspension decision, if the securities company fails to rectify the causes of the suspension specified in Point b or Point d Clause 1 of this Article, State Securities Commission will issue a decision to terminate the suspended operations.
Thus, a securities company that fails to maintain its capital requirements may be suspended from one, some or all of the operations.
After 06 months from the effective date of the suspension decision, if the securities company fails to rectify its capital requirements, State Securities Commission will issue a decision to terminate the suspended operations.
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