Circular No. 87/2017/TT-BTC: Expected to bring about a change in the 'quality' of securities companies in Vietnam

Circular No. 87/2017/TT-BTC of the Ministry of Finance of Vietnam, which takes effect on October 10, 2017, is expected to bring about a new shift in both the quantity and quality of securities-trading organizations currently operating.

Adjustment for meeting “many new things:

After nearly 6 years of implementation, Circular No. 226/2010/TT-BTC and Circular No. 165/2012/TT-BTC (collectively referred to as Circular 226) have proven effective as the quantity and quality of securities-trading organizations have developed positively. Some evaluations have shown that, alongside many other solutions, Circular 226 has made a positive and effective contribution to the restructuring of the securities market in general and the system of securities-trading organizations in particular.

However, in line with the development trend of the securities market, the recent operations of securities companies (SCs) have shown that Circular 226 needs to be amended to meet the state management requirements for the increasingly diverse activities of securities-trading organizations; at the same time, it is necessary to enhance regulations on the handling of securities-trading organizations that do not meet financial safety criteria.

In the coming time, according to the plan, several new regulations will take effect, thereby providing the market with more new products, services, and business operations, typical examples include derivative securities, warrant securities, foreign financial investment instruments, establishment of foreign branches, etc. Therefore, Circular No. 87/2017/TT-BTC is expected to create a legal framework for these new financial products and services.

The reality also shows that one of the existing issues affecting the further development of the current SCs is the lack of diversification and specialization in service provision. The competitive structure of SCs is almost indistinguishable. SCs almost exclusively provide brokerage services, and for financial products, they are only limited to listed stocks and target small individual investors; the investment banking segment has not truly developed. Small- and medium-sized SCs face fierce competition from large SCs in the area of appropriate capital service provision for small investors.

In this context, the Development Strategy of the Vietnamese securities market in the period 2011-2020, regarding SCs and the restructuring of SCs, has set the goal of developing a diversified and highly specialized group of SCs in the implementation of business operations.

Therefore, according to the assessment of the State Securities Commission (SSC), Circular No. 87/2017/TT-BTC is a first step in managing SCs according to their functions, contributing to achieving the goals of diversification and specialization in business operations of the group of SCs, by applying different levels of compliance and handling regarding the ratio of available capital and meeting the ratio of available capital depending on the complexity of providing financial products and services of SCs.

Along with that, with the changes stipulated in the new Circular, it will motivate SCs to calculate their financial capacity, as well as consider the appropriate compliance costs based on their strength before engaging in different business operations.

Many "stringent" but positive new points

According to the SSC, Circular No. 87/2017/TT-BTC inherits the calculation formulas for financial safety ratios and handling measures for securities-trading organizations that fail to meet the financial safety criteria in Circular 226; at the same time, it supplements appropriate formulas for calculating available capital for the business activities that SCs are allowed to conduct in the future.

In addition, Circular No. 87/2017/TT-BTC also supplements risk coefficients for some new financial assets that will appear on the market in the future; updates the appendix calculating financial safety criteria according to the new accounting regime.

According to Circular No. 87/2017/TT-BTC, the securities-trading organization shall submit monthly prudential ratio reports made using the form prescribed to the SSC. The report must be electronically submitted within ten (10) days from the end of the month.

In addition to the periodic reporting regime, securities-trading organizations must strictly comply with the unscheduled reporting regime. In particular, since its liquid capital ratio falls below 180%, the securities-trading organization shall submit a liquid capital ratio report to the SSC twice a month (on the 15th and 30th). Since its liquid capital ratio falls below 150%, the securities-trading organization shall submit a weekly report on liquid capital ratio to the SSC. The report must be electronically submitted before 16:00 on every Friday, etc.

Concurrently, Circular No. 87/2017/TT-BTC also supplements the handling plan to be applied to different warning levels to further manage system risks; as well as specifies regulations on different response levels (warning levels) for each SC entity based on the consideration of complexity and the risks that the SCs pose to the system.

Besides providing more detailed regulations on warning levels (warning, control, special control), the new Circular has also supplemented many provisions on the responsibilities of relevant parties.

Source: Thoi bao Tai chinh Viet Nam Online

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