Vietnam: Does the clearing member fulfill contract obligations on behalf of the one whose membership is canceled?
- Does the clearing member fulfill contract obligations on behalf of the one whose membership is canceled?
- What are the obligations of clearing members in Vietnam?
- Should a clearing and entrustment contract between a securities company that is a clearing member and an investor who is not a clearing member be sent to the Securities Depository and Clearing Corporation?
Does the clearing member fulfill contract obligations on behalf of the one whose membership is canceled?
According to the provisions at point d, clause 1, Article 31 of Decree No. 158/2020/ND-CP:
Rights and obligations of clearing members in Vietnam
1. Rights of a clearing member:
a) Request investors to provide sufficient margins on a timely manner before placing orders; decide margins according to the nature and scale of each client's transaction provided the margin shall not be lower than the minimum margin required by Vietnam Securities Depository and Clearing Corporation; decide types of securities put up as margins in the list of assets accepted as margins; determine method and time limit for providing margins, changing securities used as margins, transferring margins in accordance with regulations of law;
b) In case an investor is insolvent, the clearing member is entitled to:
- Request the investor to close its positions or compulsorily liquidate its open positions. In case an investor fails to do so, the clearing member shall directly close the investor’s positions and compulsorily liquidate the investor’s open positions;
- Use, sell or transfer the investor’s margins for buying or using them as collateral for loans which are used for fulfilling settlement obligations for the investor's open positions;
c) Use the investor’s margins to fulfill obligations to provide Vietnam Securities Depository and Clearing Corporation with margins for the investor's positions according to the rules in Clause 2 Article 33 hereof; use the investor's margins to fulfill settlement obligations or make payments for the investor’s positions that it is holding in its name;
d) The clearing member that fulfills contract obligations on behalf of the one whose membership is suspended or canceled as prescribed in Clause 3 Article 28 hereof may receive and manage the investor’s margins transferred from the later.
Thus, according to the above provisions, a clearing member has the right to fulfill contract obligations on behalf of the one whose membership is suspended or canceled.
Vietnam: Does the clearing member fulfill contract obligations on behalf of the one whose membership is canceled?
What are the obligations of clearing members in Vietnam?
According to the provisions of Clause 2, Article 31 of Decree No. 158/2020/ND-CP on the obligations of clearing members as follows:
- Act as a representative as authorized by clients, or act on behalf of clients, to fulfill their obligations towards Vietnam Securities Depository and Clearing Corporation;
- Make contributions to the clearing fund; provide sufficient and timely margins for Vietnam Securities Depository and Clearing Corporation for its open positions and open positions of its clients; implement professional assistance measures according to Vietnam Securities Depository and Clearing Corporation’s instructions in case the clearing member or its investor is insolvent or declared bankrupt;
- Establish and maintain internal control system, risk management system and procedure for each business operation; establish and operate the account system to separately manage assets and trading positions of each investor and of investors from those of the clearing member;
- Determine position-based gain or loss, and calculate margins and the value of margins for each trading account of investors; request investors to provide additional margins in a timely and adequate manner; refund the excess amount of margins as requested by investors; supervise and manage positions and margins of investors so as to ensure the compliance with regulations of law;
- Make compensation for investors in case the clearing member fails to fulfill its obligations as prescribed by law and thus causes damage to investors’ lawful interests. The level of compensation shall be agreed upon with the relevant investor;
- Provide Vietnam Securities Depository and Clearing Corporation with the copy of clearing and settlement entrustment contract; adequately retain original documents about clearing and settlement for derivative transactions; adequately, punctually and accurately provide information about open positions and margins of investors and other documents related to derivative trading, clearing and settlement at the request of Vietnam Securities Depository and Clearing Corporation;
- Fully and punctually pay service charges and other expenses to Vietnam Securities Depository and Clearing Corporation as prescribed;
- The clearing member whose membership is suspended or canceled shall transfer all margins and open positions of clients, and provide all necessary information about clients for the substitute clearing member, and continue fulfilling its obligations until completing the transfer of its rights and obligations to the substitute clearing member;
- Disclose information and submit reports as prescribed; provide investors with adequate information about operations on their accounts, margin account balances and statements on a periodical basis or at their request.
Should a clearing and entrustment contract between a securities company that is a clearing member and an investor who is not a clearing member be sent to the Securities Depository and Clearing Corporation?
According to the provisions at point e, clause 2, Article 31 of Decree No. 158/2020/ND-CP on this content as follows:
Rights and obligations of clearing members in Vietnam
...
2. Obligations of clearing members:
...
e) Provide Vietnam Securities Depository and Clearing Corporation with the copy of clearing and settlement entrustment contract; adequately retain original documents about clearing and settlement for derivative transactions; adequately, punctually and accurately provide information about open positions and margins of investors and other documents related to derivative trading, clearing and settlement at the request of Vietnam Securities Depository and Clearing Corporation;
According to the above provisions, the securities company is obliged to provide the Vietnam Securities Depository and Clearing Corporation with a copy of clearing and settlement entrustment contract.
LawNet
