SSC drafts regulations to boost market upgrade

A trader talks to an investor on a trading floor in Hà Nội. — Photo bnews.vn

HÀ NỘI — The State Securities Commission of Việt Nam (SSC) has officially published a draft circular that aims to amend and supplement several articles of four existing documents governing the securities market, following feedback.

It seeks to update and refine the rules around securities trading, clearing and settlement, securities company operations, as well as information disclosure requirements on stock exchanges.

The draft circular introduces several provisions intended to facilitate the participation of foreign institutional investors in the domestic stock market. It aims to remove the pre-funding requirement, allowing these investors to purchase securities without the need to have the full amount of required funds in their accounts upfront, ensuring equal access to market information for foreign investors.

Under the proposed framework, securities companies will assess the settlement risk of each foreign institutional investor and determine the appropriate level of required funds for their securities purchase orders, based on a mutual agreement. 

In the event a foreign investor fails to fully settle a transaction, the remaining payment obligation will be transferred to the securities company where the order was placed, through the company’s proprietary trading account, with a few specified exceptions.

In such cases, the securities company is permitted to sell the shares that were transferred to its proprietary trading account to the defaulting foreign investor, either through an off-exchange agreement or a transaction on the securities trading system.

This must be done by the next trading day after the shares were booked into the securities company’s account, as long as the transaction does not exceed the maximum foreign ownership limit for those shares.

Except for this specific scenario, the securities company must sell the shares on the securities trading system. Any financial obligations arising from these transactions will be carried out according to the agreement between the securities company and the foreign institutional investor or its authorised representative.

When a foreign institutional investor places a securities purchase order, but fails to fully settle the transaction as required, the Vietnam Securities Depository and Clearing Corporation (VSDC) will transfer the remaining payment obligation to the securities company where the purchase order was placed. 

The securities company will be responsible for settling the transaction through its own proprietary trading account.

The draft regulation also introduces changes to the settlement timeline for foreign institutions. Previously, these investors were required to have sufficient funds in their accounts by around 2.30pm on T+1 (one day after the trade date). Under the new proposal rules, the deadline has been moved to 9.30am on T+2. This reduces the timeframe between when the foreign institution must fulfil its settlement obligation and when the securities are delivered down to just a few hours, from 9.30am to 1pm on T+2.

Regarding information disclosure, the draft circular also stipulates that the language for information disclosure in the securities market shall be Vietnamese. Listed organisations, public companies, stock exchanges and the VSDC are required to disclose information simultaneously in both Vietnamese and English.

The English language disclosure must be consistent with the content of the Vietnamese language disclosure. In the event of any discrepancy or difference in interpretation between the Vietnamese and English information, the Vietnamese information shall be considered the original and authoritative version.

The requirement for simultaneous disclosure in English applies according to the following phased approach: Large-scale listed organisations and public companies shall commence simultaneous disclosure of periodic information in English starting from January 1, 2025.

The large listed organisations and public companies will need to provide English-language versions of their extraordinary disclosures, information disclosed upon request and details about other company activities starting from January 1, 2026. 

For public companies that do not fall into the large-listed category, the requirement to provide English disclosures for periodic reporting will begin on January 1, 2027. 

These companies will be expected to offer English versions of their extraordinary disclosures, information disclosed upon request and details about other activities starting from January 1, 2028. — VNS