Additional regulation on purchase of shares by foreign institutional investors exempted from minimum fund requirements in Vietnam

Additional regulation on purchase of shares by foreign institutional investors exempted from minimum fund requirements in Vietnam

In Clause 2, Article 1 of Circular 68/2024/TT-BTC, Article 9a has been added to Article 9 of Circular 120/2020/TT-BTC on the regulation of purchase of shares by foreign institutional investors exempted from minimum fund requirements in Vietnam:

- Securities companies shall assess the payment risk of institutional foreign investors to determine the required funds at the time of placing a stock purchase order (if any) according to the agreement between the securities company and the institutional foreign investor or the authorized representative of the institutional foreign investor.

- In cases where an institutional foreign investor does not fully pay for stock purchase transactions, the payment obligation for the underfunded transaction is transferred to the securities company where the institutional foreign investor placed the order through its proprietary trading account, except for the cases specified in Clause 5, Article 9 of Circular 120/2020/TT-BTC.

- Securities companies are allowed to transfer ownership outside of the stock trading system as per the regulation in point q1, Clause 2, Article 6 of Circular 119/2020/TT-BTC or sell through negotiation on the stock trading system for the stocks already transferred to their proprietary trading account for institutional foreign investors with insufficient payment for stock purchase transactions as regulated in Clause 2, Article 9 of Circular 120/2020/TT-BTC, at the latest by the next trading day after the stocks were credited to the securities company's proprietary trading account, ensuring that the maximum foreign ownership limit for those stocks is not exceeded according to the law.

The profits, losses, and other costs incurred when executing transactions in accordance with Clause 2, Clause 3, Article 9 of Circular 120/2020/TT-BTC shall be handled according to the agreement between the securities company and the institutional foreign investor or the authorized representative of the institutional foreign investor.

- Aside from transactions prescribed in Clause 3, Article 9 of Circular 120/2020/TT-BTC, securities companies are required to sell the stocks on the stock trading system for the stocks already transferred to their proprietary trading account.

The profits, losses, and other costs incurred when executing transactions according to Clause 2, Clause 4, Article 9 of Circular 120/2020/TT-BTC shall be handled according to the agreement between the securities company and the institutional foreign investor or the authorized representative of the institutional foreign investor.

- The custodian bank where the institutional foreign investor opens a securities custody account is responsible for paying the underfunded transaction and any incurred costs (if any) in case of incorrect confirmation of the deposit balance of the institutional foreign investor with the securities company, leading to insufficient funds for the stock purchase transaction.

More details can be found in Circular 68/2024/TT-BTC which comes into force in Vietnam from November 2, 2024.

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