Regulations for Investors engaging in margin transactions on the securities market in Vietnam

Investors engaging in margin transactions must comply with the regulations in the Draft Circular guiding transactions on the securities market as follows:

Regulations for Investors engaging in margin transactions on the securities market in Vietnam (illustrative photo)

- Foreign investors are not allowed to engage in margin transactions.- Before engaging in margin transactions, an investor must sign a margin transaction contract with a securities company providing services for customers to borrow money for stock purchases, advance money from stock sales.

-  The  margin  transaction  contract  concurrently  serves  as  the  loan  agreement  for  loans  on  the  margin  transaction  account.  The  margin  transaction  contract  must  include,  at  a  minimum,  details  on  margin  assets,  the  deadline  for  margin  top-up,  handling  of  margin  assets  if  the  investor  fails  to  top  up,  methods  of  dispute  resolution,  clarification  of  possible  risks,  damages  that  may  arise,  and  customer  payment  costs.

- At each securities company where an investor opens a securities transaction account, the investor is allowed to open only one (01) margin transaction account.

-  The  margin  transaction  account  is  a  separate  account  or  is  separately  managed  or  accounted  for  as  a  sub-account  of  the  investor's  existing  securities  transaction  account.  The  securities  company  must  separately  account  for  the  margin  transaction  account  with  the  normal  securities  transaction  account  of  each  investor  and  separate  the  margin  transaction  account  and  the  normal  securities  transaction  account  among  different  investors.

- Investors are obliged to ensure the initial margin ratio and the maintenance margin ratio as per the contract signed with the securities company. When the margin ratio on the investor's margin transaction account falls below the maintenance margin ratio, the securities company will issue a margin call for additional collateral. Securities that are not allowed for margin transactions will not be counted as collateral assets when determining the initial margin ratio and maintenance margin ratio for margin transactions.

- In case the investor does not comply, the securities company has the right to sell the pledged securities according to the terms in the margin account opening contract. Before selling the pledged securities, the securities company must disclose information per the legal regulations on information disclosure in the securities market and notify the investor with a statement of the result of the pledged securities sale to fulfill the reporting obligations on ownership and transaction information disclosure according to relevant legal regulations (if any).

See details in the Draft Circular guiding transactions on the securities market.

Long Binh

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