Sales Info Corner

Institutional Equities Sales, Maybank Investment Bank Vietnam

Summary of SSC’s Draft Circular on Prefunding

What happened?
➢ The SSC published the Draft Circular amending and supplementing Circulars 96, 119, 120, 121 on regulating
stock trading activities, clearing and settlement of transactions, operations of securities firms and information
disclosure on the stock market
➢ As usual, our Institutional Sales team have summarized the Draft Circular as below with the aims to simplify
and emphasize the main points of the law.
➢ In the Draft Circular, there are 3 main points to note:
1. Allowing transactions which do not require 100% cash prefunding for foreign institutional investors
2. Execution, clearing and settlement of transactions, operations and responsibilities of parties involved
3. Timeline to implement mandatory disclosure in English (prerequisite for market upgrade)

Article 1: Regulation on trading of listed equities

(Amending Article 7 & 9, Circular 120/2020/TT-BTC)
Previous Regulation Proposed Changes
• Foreign investors in Vietnam, including • Foreign institutional investors are now permitted to engage in
individual and institutional investors, are margin trading without 100% prefunded cash as defined in
required to set up a fully funded account clause 9a below or having guarantee of payment certified by
(ensuring a prefunding of 100% cash) before custodian banks
executing buy orders in the stock market Supplement for Clause 9a:
• Conversely, local institutions, brokers and • Brokers must conduct KYC checks on their clients to establish
depository banks are NOT allowed to grant a suitable prefunding ratio for each client. Following this,
margin or credit facilities to foreign investors institutional investors can place orders without having 100%
prefunded cash in their account and settle the transaction
later
• If institutional investors fail to settle the transaction, the
broker hosting the investors' trading account and where the
orders were executed will take responsibility for covering the
shortfall through the broker's proprietary account. The
securities will then be immediately sold once credited. Any
costs arising from this situation will be resolved according to
the pre-agreed terms between the broker and the client.
• If the custodian banks cause false confirmation of investors'
deposit balances with the broker results in insufficient funds
for settlement, the custodian bank is responsible for covering
the shortfall
• The SSC retains the authority to temporarily suspend non-100%
prefunding offerings in special circumstances for market
Source: Maybank IBG Institutional Sales Vietnam compilation stabilization measures 1
 Sales Info Corner
Institutional Equities Sales, Maybank Investment Bank Vietnam

Summary of SSC’s Draft Circular on Prefunding

Article 2: Settlement procedures for securities purchase transactions that do not require 100% prefunding
(Amending & supplementing Article 35, Circular 119/2020/TT-BTC)

Previous Regulation Proposed Changes

Not available Supplement 35a to Clause 35 on execution as below:
• Foreign institutional investors must ensure they have enough funds in their
accounts to settle their securities purchase transactions before the clearing
member confirms the securities trading results with the Vietnam Securities
Depository and Clearing Corporation (VSD).
• In the event that a foreign institutional investor does not have enough funds
within the prescribed period, the obligation to settle the shortfall in securities
purchase transactions will be transferred to the securities company where the
investor placed the securities order. This process will be as follows:
1. If the foreign institutional investor holds a custody account with a
securities company, the securities company will notify the VSD of the
insufficient funds for securities transactions and request the transfer of
the payment obligation to the securities company.
2. If the foreign institutional investor holds a custody account with a
custodian bank, the custodian bank will notify the VSD of the rejection
of payment for the securities transaction due to insufficient funds.
3. Based on the notifications from 1) and 2), the VSD will transfer the
obligation to settle the shortfall in securities purchase transactions of
the foreign institutional investor to the securities company where the
investor placed the securities order (via the proprietary account of the
securities company).
• The securities company where the foreign institutional investor places the
securities purchase order must fulfill the obligation to settle transactions for
securities purchases with insufficient funds of foreign institutional investors.
• The securities company needs to ensure it has sufficient capital for
settlement; otherwise, it will be subject to legal consequences as prescribed
by the law and regulations of the Vietnam Securities Depository and Clearing
Corporation.

Source: Maybank IBG Institutional Sales Vietnam compilation

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 Sales Info Corner
Institutional Equities Sales, Maybank Investment Bank Vietnam

Summary of SSC’s Draft Circular on Prefunding

Article 3: Responsibilities of market members and custodians on non-100% prefunding transactions

(Amending & supplementing Articles 16 & 28, Circular 121/2020/TT-BTC)

Previous Regulation Proposed Supplements:

Not available • In case an institutional investor opens a custody account at a custodian member
who is not a trading member, the trading member and the custodian member must
sign an agreement to ensure the principle that the trading member is responsible for
executing trading orders, while the custodian member is responsible for verifying the
cash and securities reserve ratio of the client and ensuring payment to the client in
accordance with the law
• Brokers extending margin facilities to foreign clients are required to address any
cash shortfall in transactions settlement
• Brokers are prohibited from providing margin services on the following transactions:
1) Buying shares of the broker itself if the broker is listed;
2) Buying shares of companies in which the broker is a majority shareholder
3) Buying shares of the broker’s parent company
• In case the broker's investment exceeds the limit due to the implementation of
underwriting, as a result of M&A, or due to fluctuations in assets, equity of the
securities company, or contributed capital organization, the securities company must
apply necessary measures to comply with the investment limit, maximum within a
period of 01 year.
• If the securities company's investment exceeds the limit due to providing non-100%
prefunding trading services for foreign institutional investors, the securities company
shall not continue to provide the aforementioned services until complying with the
investment limit

Source: Maybank IBG Institutional Sales Vietnam compilation

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 Sales Info Corner
Institutional Equities Sales, Maybank Investment Bank Vietnam

Summary of SSC’s Draft Circular on Prefunding

Article 4: Information disclosure requirements

(Amending & supplementing Article 5, Circular 96/2020/TT-BTC)

Previous Regulation Proposed Regulation

• Public companies are only required to • Public companies will be required to disclose information in
disclose information in Vietnamese both Vietnamese and English. In case of any disparities
between the two versions, the Vietnamese rendition will be
• Only Stock Exchanges and the VSD are
considered authoritative
required to disclose information in both
English and Vietnamese • For large-scale public firms (shareholders' equity exceeding
VND120b), the schedule for mandatory English information
disclosure will commence as follows:

1. Periodic disclosure: 1 Jan, 2025

2. Irregular, on-demand disclosure: 1 Jan, 2026

• For other public firms, the timeline to begin mandatory English

information disclosure is outlined as follows:

1. Periodic disclosure: 1 Jan, 2027

2. Irregular, on-demand disclosure: 1 Jan, 2028

• In case a foreign institutional investor fails to fulfill the

payment obligation, the securities company where the foreign
investor places the trading order must report to the State
Securities Commission, and the Stock Exchange within 24
hours from the completion of the transaction payment
shortfall.

Source: Maybank IBG Institutional Sales Vietnam compilation

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INSTITUTIONAL SALES,
MAYBANK SECURITIES LIMITED

Tyler Manh Dung Nguyen (Head) Nguyen Khoi Nguyen Nguyen Hai Yen
(84 28) 44 555 888 ext 8080 - 8715 (84 28) 44 555 888 ext 8080 (84 28) 44 555 888 ext 8076
[email protected] [email protected] [email protected]