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question and answer
:: Question :: Under the event that the Investor sells the securities which are on their ways to the account of the Investor, is it considered a short sell or not ?
Answer:
Pursuant to Article 71.9 of the Law on Securities 2006 on obligations of securities companies (SC), it is regulated that obligation of a SC is to conduct the sale of, or to permit the client to sell securities, which are un-owned and to lend a clients securities to sell in accordance with regulations of the Ministry of Finance (MOF).
Therefore, it is understood that the law does not prohibit a SC to permit the Investors to sell their securities when they have not owned them, however, the sale must comply with regulations by the MOF. Currently, the MOF has not issued any regulation on short sell of securities.
In respect of the time of effectiveness of a transfer of ownership of securities at a Securities Depository Centre (SDC), the SC understands the provisions in Article 54.2 (a) as follows:
In the case of securities which have been deposited in the form of general depository at a
Securities Trading Centre, transfer of ownership of the securities shall be effective on the day on which a book entry is made in the securities depository account at the SDC. Legally, it is an exact understanding. However, whether the Investors have become the owners of securities or not is not the legal basis to define whether they have right to place orders to sell these securities or whether the SC is entitled to receive orders of the Investors. The moment that Investors are entitled to place orders to sell their securities and the SC is entitled to receive their orders must comply with regulations on the current securities law and regulation.
Pursuant to Article 33.5 of the regulations on organization and operation of SC issued attached with Decision No. 27-2007-QD-BTC of the MOF dated April 24, 2007, a SC shall only be permitted to receive orders from clients with sufficient money and securities as stipulated by the State Securities Commission, and must take necessary measures to ensure the ability of clients to pay when a trading order is performed.
In addition to that, pursuant to Article 9 of the Regulation on Securities Trading at the Hanoi Securities Trading Centre (now is Hanoi Stock Exchange) issued attached with Decision No. 353/QD-TTGDHN dated November 26, 2007 of the Director of Securities Trading at the Hanoi Securities Trading Centre, it is regulated as below: An Investor must, when placing a securities purchase order or a purchase order by way of put through trading, have a sufficient quantity of securities offered for sale in its securities trading account opened at the member, unless otherwise stipulated by the MOF.
Regulation on Securities Trading at the Ho Chi Minh Securities Trading Centre (HOSE) provides as below:
When placing a securities sale order or publishing to selling securities (when placing a securities purchase or publishing to purchase securities), the balance of securities (money) in the account of the Investor opened at a member must satisfy conditions on deposit level of securities (money).
Therefore, pursuant to the applicable laws and regulations, before the securities reach the account of the Investors, the Investors are not permitted to place order to sell such securities, and the SC is not permitted to accept such orders unless there are securities in the account of the Investors. Any Investor who sells securities that are on the way to his/her account shall commit breach of the laws on securities.
orther:
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- » Question :: We are a group of small investors holding the shares in a number of public companies. As known, on June 24, 2009, State Securities Commission (SSC) issued Official Letter No. 1234/UBCK-QLPH on checking the charter of public companies. This Official Letter enforces public companies to check their Charter and plan to adjust any regulations contrary to the current law during the annual General Meeting of Shareholders (GMS) of year 2009. After this term, any public company whose charter still contraries to the law shall be punished according to the law. Please kindly advise how the laws deal with this case? (11/09/2009)
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