Perfecting the legal framework to promote upgrading the stock market

According to the draft, large-scale public companies must disclose information in English. Source: Internet

There is no requirement to have enough cash for foreign investors

This draft amends Circular 120/2020/TT-BTC to require investors to have sufficient funds when placing a buy order for securities, except for the following transactions: margin trading (as stipulated in Article 9); and the purchase of shares by foreign investors (FIs) that do not require full payment upon placing an order (as stipulated in Article 9a) of this Circular.

Specifically, the latest draft adds Article 9a, which stipulates the purchase of shares by FIs. Accordingly, securities companies (SCs) shall assess the payment risk of FIs to determine the required margin (if any) when placing a buy order, as agreed between the securities company and the FI. In case an FI fails to make full payment for the purchase, the remaining payment obligation shall be transferred to the securities company where the FI placed the order through the SC's proprietary account.

The securities company may conduct a negotiated transaction on the securities trading system or transfer ownership outside the securities trading system in accordance with the regulations on registration, custody, clearing, and settlement of securities for the number of shares transferred to its proprietary account for the FI that has failed to make full payment for the purchase, at the latest on the trading day following the day on which the shares are credited to the securities company's proprietary account, provided that this transaction does not exceed the foreign ownership limit for such shares as prescribed by law. The financial matters arising from the transaction shall be executed in accordance with the agreement between the securities company and the FI or the FI's authorized representative.

The draft Circular also adds Article 35a, which stipulates the payment for the purchase of shares by FIs. Accordingly, FIs placing a buy order must have sufficient funds in their accounts before the custodian member must transfer funds to the custodian member's deposit account at the clearing bank to settle the securities transaction. The clearing and settlement of the purchase transaction shall be carried out in accordance with the law and the regulations of the Vietnam Securities Depository (VSDC).

In case an FI placing a buy order fails to make full payment as prescribed, the VSDC shall transfer the remaining payment obligation of the FI for the purchase to the SC where the investor placed the buy order (through the SC's proprietary account) on the settlement date. Specifically, in case the FI opens a custody account at the SC, the SC shall notify the VSDC that the foreign investor does not have sufficient funds to pay for the purchase and the transaction information, requesting the transfer of the payment obligation to the SC. The SC must ensure that it has sufficient funds to settle the transaction as prescribed. The SC shall be subject to sanctions as prescribed by law and the VSDC's regulations in case it fails to fulfill its obligations as prescribed.

In case the FI opens a custody account at a custodian bank, the custodian bank shall notify the VSDC that the foreign investor does not have sufficient funds to pay for the purchase and refuse to settle the underpaid transaction.

Large-scale public companies must disclose information in English

In addition, the draft decree amends and supplements several provisions of Circular 96/2020/TT-BTC of the the Ministry of Finance guiding the disclosure of information on the securities market. Specifically, the draft amends Article 5 regarding the language used in information disclosure.

Accordingly, Vietnamese shall be the official language used in all information disclosed on the securities market. However, listed companies, public companies, stock exchanges, and VSDC must simultaneously disclose information in English as prescribed in Clauses 2 and 3 of this Article. The information disclosed in English must be consistent with the content disclosed in Vietnamese. In case of any discrepancy or different interpretation between the Vietnamese and English versions, the Vietnamese version shall be the original version for reference.

Regarding the roadmap for simultaneous disclosure in English, the draft decree stipulates that large-scale listed companies and public companies must start disclosing periodic information in both Vietnamese and English from January 1, 2025.

Experts believe that the issuance of this draft decree will have a positive impact on the process of upgrading Vietnam's securities market. Mr. Do Bao Ngoc, Deputy General Director of Construction Securities Joint Stock Company, stated that the provisions in the draft decree are actions to realize the significant changes in the current regulations of the management agency aimed at fully meeting the basic requirements of the FTSE rating organization. This change will enhance the possibility of Vietnam's securities market being positively assessed in the upcoming market assessment reports of the FTSE rating organization, specifically in September 2024 and March 2025.