Foreign institutional investors will be officially allowed to buy shares without requiring sufficient funds when placing an order.

The Ministry of Finance has just officially issued Circular 68/2024/TT-BTC dated September 18, 2024 amending and supplementing a number of articles of the Circulars regulating securities transactions on the securities trading system; clearing and settlement of securities transactions; activities of securities companies and information disclosure on the stock market.

Foreign investors are organizations that can place orders without having to fund 100% of the money.

In Article 1, Circular 68 amended and supplemented a number of articles of Circular No. 120/2020/TT-BTC regulating the trading of listed stocks, registration of transactions and fund certificates, corporate bonds, and listed secured warrants on the securities trading system.

Specifically, the new Circular stipulates that investors must have sufficient money when placing an order to buy securities, except in the following cases: investors trading on margin as prescribed in Article 9 of this Circular; Organizations established under foreign law participating in investment in the Vietnamese securities market (hereinafter referred to as foreign investors being organizations) purchasing stocks are not required to have sufficient money when placing an order as prescribed in Article 9a of this Circular.

Circular 68 added Article 9a after Article 9 of Circular 120/2020/TT-BTC regulating "Share purchase transactions do not require sufficient funds when placing orders by foreign institutional investors".

The Circular stipulates that securities companies shall assess the payment risk of foreign institutional investors to determine the amount of money required when placing an order to buy shares (if any) according to the agreement between the securities company and the foreign institutional investor or the authorized representative of the foreign institutional investor.

In case a foreign investor that is an organization fails to pay enough money for a stock purchase transaction, the obligation to pay for the transaction with insufficient money shall be transferred to the securities company where the foreign investor that is an organization places the order through the self-trading account, except for the case specified in Clause 5 of this Article.

The Circular also clearly stipulates that securities companies are allowed to transfer ownership outside the securities trading system as prescribed in Point q1, Clause 2, Article 6 of Circular No. 119/2020/TT-BTC regulating the activities of registration, depository, clearing and payment of securities transactions or sale by agreement on the securities trading system for the number of shares transferred to their own trading accounts for foreign investors who are organizations lacking money to pay for stock purchase transactions as prescribed in Clause 2 of this Article, no later than the trading day following the day the shares are recorded in the securities company's trading account and ensuring that they do not exceed the maximum limit on the ownership ratio of foreign investors as prescribed by law for such shares. Losses, profits and other expenses arising from the execution of transactions as prescribed in Clause 2 and Clause 3 of this Article shall be made according to the agreement between the securities company and the foreign institutional investor or the authorized representative of the foreign institutional investor.

According to Circular 68, except for transactions specified in Clause 3, Article 9a, securities companies shall sell shares on the securities trading system for the number of shares transferred to the self-trading account. Losses, profits and other expenses arising from transactions specified in Clause 2 and Clause 4, Article 9a shall be made according to agreements between securities companies and foreign institutional investors or authorized representatives of foreign institutional investors.

Circular 68 also clearly stipulates that the depository bank where the foreign institutional investor opens a securities depository account is responsible for paying for transactions with insufficient funds and any costs incurred (if any) in case of incorrect confirmation of the deposit balance of the foreign institutional investor with the securities company, leading to insufficient funds to pay for the stock purchase transaction.

Securities companies must ensure sufficient funds to pay for transactions.

Circular 68 also amends and supplements a number of articles of Circular No. 119/2020/TT-BTC regulating the registration, depository, clearing and payment of securities transactions.

Specifically, Circular 68 adds Article 35a after Article 35 on payment for stock purchase transactions of foreign investors who are organizations specified in Article 9a of Circular No. 120/2020/TT-BTC.

The new circular clearly states that foreign institutional investors placing orders to buy shares must have sufficient funds in their accounts before the time when the depository member must transfer funds into the depository member's deposit account at the payment bank to make payment for securities transactions. Clearing and payment for stock purchase transactions shall be carried out in accordance with the law and regulations of the Vietnam Securities Depository and Clearing Corporation (VSDC).

In case the foreign investor is an organization that places an order to buy shares and lacks payment as prescribed in Clause 2, Article 9a of Circular No. 120/2020/TT-BTC, VSDC shall transfer the payment obligation for the stock purchase transaction of the foreign investor being an organization to the obligation of the securities company where the investor places the stock purchase order (through the securities company's proprietary account) on the payment date, based on the following notices: In case the foreign investor is an organization that opens a depository account at a securities company, the securities company shall notify VSDC of the foreign investor's lack of payment for the stock purchase transaction and the transaction information requesting to be transferred to the payment obligation of the securities company; In case the foreign investor is an organization that opens a depository account at a custodian bank, the custodian bank shall notify VSDC of the foreign investor's lack of payment for the stock purchase transaction and refuse to pay for the transaction with insufficient money.

“Securities companies must ensure sufficient funds to pay for transactions as prescribed in Clause 2 of this Article. Securities companies will be subject to penalties in accordance with the law and VSDC regulations in case they fail to ensure the performance of obligations as prescribed in Clause 2 of this Article” - Circular 68 clearly states.

Source: https://nhandan.vn/foreign-investors-are-organized-to-be-officially-allowed-to-buy-stocks-without-requiring-payment-when-making-orders-post831697.html