Financial Regulations Applicable to Securities Companies

18/01/2021, 08:15 AM

The Ministry of Finance has just issued Circular 121/2020 / TT-BTC regulating the operations of securities companies, in which, clearly stating the borrowing restrictions, lending restrictions and investment restrictions, of the Securities company.

Specifically, the Circular provides for loan restriction as follows: The ratio of total debt to equity of securities company must not exceed 05 times. The total debt value under this regulation does not include the following items: Customer's securities trading deposits; Bonus and welfare; Provision for job loss; Provision for unemployment benefits; Provision for damages to investors.

As for loan restriction, the Circular states: Except for the case specified in Clause 1, Article 86 of the Law on Securities, securities companies are not allowed to lend money, securities in any form.

Securities company is not allowed to use money, assets of the company or customers to secure payment obligations to a third party.

Securities company is not allowed to lend in any form to the owners, major shareholders, members of the Supervisory Board, members of the Board of Directors, members of the Members' Council, members of the Board of Directors, chief accountant, Other managerial positions appointed by the Board of Directors of securities company and related persons of the above subjects.

Securities companies, which have been allowed to perform margin transactions according to the law provisions, are allowed to lend customers money to buy securities in the form of margin trading under the guidance of the Ministry of Finance.

Securities company is allowed to donate securities to correct transaction errors, or to provide loans to perform swap transactions of portfolio swap fund certificates or other forms in accordance with relevant laws.

Investment restrictions

Securities company is not allowed to buy, contribute capital to buy real estate except for use as head office, quick payment, transaction office directly serving the professional activities of securities company.

Securities company buys and invests in real estate in accordance with the above regulations and fixed assets on the principle that the residual value of fixed assets and immovable property must not exceed 50% of the total value of assets of Securities Company.

The total value of investment and corporate bonds of a securities company must not exceed 70% of equity. Securities companies licensed to conduct securities dealing operations may buy and resell listed bonds according to relevant regulations on bond repurchase transactions.

Securities company is not allowed to directly or entrust other organizations and individuals to implement: Investing more than 20% of the total number of shares, fund certificates in circulation of a listed organization; investing more than 20% of the total number of shares and fund certificates in circulation of a unlisted organization; investing more than 15% of the total number of shares and fund certificates in circulation of an unlisted organization. This provision does not apply to member fund certificates, exchange-traded funds and open-ended funds; Investing more than 70% of equity in stocks, capital contributions and business projects, in which no more than 20% of equity must be invested in unlisted stocks, capital contributions and business projects.

Source: Bao Chinh Phu

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