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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:
- » Question :: Before the opening of one General Meeting of Shareholders (GMS) of a listed Company (Company A), an institutional shareholder (Company B) convening this meeting on its own initial issuing a template of Power of Attorney printed with its seal hanging on a corner of this template. Company B requests that the authorization for a representative to attend this GMS must be performed in accordance with this template. Please advise whether this stipulation of Company B is lawful or not? (19/05/2009)
- » Question :: Upon having been approved at principle on establishment by the State Securities Commission of Vietnam, a security company (“SC”) sold its shares to parties other than founding shareholders. After that, the SC could not be established as the founding shareholders did not continue to contribute their capital. In this case, how can we deal with those sold shares? (04/05/2009)
- » Question :: An electric construction joint stock company is a State-Owned-Enterprise converting into Joint Stock Company since October 2003, a part of its employees was entitled to buy shares paid by installments within 10 years. Currently, it has become a publicly company and on the way of listing its shares in Stock Exchange Market. Thus, it is necessary to amend its organizational and operational Charter in accordance with Decision No. 15/2007/QD-BTC dated 19 March 2007 issued by the Minister of Finance. According to the Article 8.2 of the standard form of the Company’s Charter (“Standard Charter”):“Shares that have not been paid fully yet shall not be entitled to transfer and benefit dividends”. Hence, how could this Company deal with the shares paid by installments by its employees? (04/05/2009)
- » Question :: What happen if a securities company (the “SC”) or a fund management company (the “FMC”) fails to satisfy conditions on the charter capital in accordance with Decree No. 14/2007/ND-CP (“Decree 14”) providing detailed guidelines for implementing some articles of the Law on Securities? Which sanctions can be applied to such failure? (21/04/2009)
- » Question :: I have 8000 shares of Company A with the market price of approximately 100,000,000 VND (One hundred million Vietnamese Dong). Due to my negligence, I lost my shareholder’s book. Can I have the right to request for re-issurance of the shareholder’s book or not and what are the procedures to re-issue it? (21/04/2009)