On April 26, 2025, the Minister of Finance issued Circular No. 18/2025/TT-BTC (“Circular 18”) amending and supplementing several articles of Circular No. 119/2020/TT-BTC dated December 31, 2020, providing regulations on securities registration, depository, clearing and settlement, and Circular No. 96/2020/TT-BTC dated November 16, 2020, guiding information disclosure on the securities market (as amended and supplemented by Circular No. 68/2024/TT-BTC dated September 18, 2024). One of the most notable highlights of Circular 18 is the detailed guidance on trading, registration, depository, clearing, settlement, and information disclosure activities related to non-prefunded transactions conducted by foreign institutional investors (“Non-Prefunding Investors”). ATA Legal Services would like to provide you with the following updates:
1. Supplementing off-exchange share transfer cases for transactions transferring shares from Non-Prefunding Investor accounts to proprietary accounts of securities companies
Circular 18 supplements the off-exchange share transfer case applicable to shares and rights arising from shares (if any) that are transferred from the account of a Non-Prefunding Investor to the proprietary account of the securities company where the investor has placed an order, in case the investor fails to confirm, confirms but fails to perform, or confirms performance but fails to fulfill the payment obligation for the securities purchase order according to the agreement with the securities company within the prescribed time limit.
At the same time, Circular 18 abolishes the provision on transferring ownership of shares already transferred to the securities company’s proprietary account back to the account of the Non-Prefunding Investor in case the put-through sale on the trading system could not be executed on the date of ownership transfer. Accordingly, Non-Prefunding Investors violating the payment obligation will be required to repurchase the shares on the trading system, except for cases approved by the State Securities Commission (“SSC”).
2. Supplementing regulations guiding trading and settlement of non-prefunded transactions by Non-Prefunding Investors
a) Trading process:
(i) Securities companies must confirm with the Vietnam Securities Depository and Clearing Corporation (VSDC) about the sufficiency of funds in the deposit account to ensure payment for the investor's securities transactions:
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Securities companies shall confirm with the VSDC the sufficiency of funds for payment obligations of the Non-Prefunding Investor.
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If confirming sufficient funds: the securities company must have sufficient funds in the deposit account for the settlement bank or custodian bank to block funds to ensure payment for securities transactions of the Non-Prefunding Investor as notified by the VSDC.
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If confirming insufficient funds: the securities company shall request the settlement bank to block the existing funds for the securities purchase and notify the VSDC with detailed information of the transaction lacking sufficient funds so that the VSDC can exclude this transaction from the settlement.
(ii) Securities companies with insufficient funds will not have transactions excluded only if the total value of such transactions does not exceed the difference between the contribution of the securities company to the payment support fund and the amount already used and not yet returned to the fund. The securities company shall be responsible for fully settling such transactions on the settlement date.
(iii) Principles for excluding transactions due to insufficient funds:
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The total value of remaining transactions with insufficient funds not excluded of a Non-Prefunding Investor at all securities companies on the same day does not exceed VND 50 billion.
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The VSDC processes transactions in chronological order, prioritizing transactions of securities companies that submitted insufficient fund notifications earlier and prioritizing earlier securities purchase transactions of that securities company. The securities company shall be responsible for fully settling the transactions not excluded from settlement on the settlement date.
(iv) After the VSDC completes the confirmation or exclusion of transactions, the settlement bank/custodian bank shall block, confirm the blocking or release the blocked funds according to the VSDC's notice.
b) Regulations on post-trade error correction:
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Cases of post-trade error correction:
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The securities company places an incorrect order on behalf of the investor.
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The securities company places an order for the investor having a depository account at the custodian bank without the confirmation of the custodian bank regarding the investor's cash/securities balance, or the order does not match the custodian bank's confirmation.
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The custodian bank provides inaccurate confirmation to the securities company regarding the investor's cash/securities balance, resulting in insufficient funds/securities for settlement.
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The investor's account does not have sufficient securities at the time when the VSDC moves securities from the trading account to the pending settlement account to prepare for settlement.
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The investor's transaction is associated with a depository account that is not registered in the same market area under the VSDC’s regulations.
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Error correction shall be carried out by adjusting the erroneous transaction to the proprietary trading account of the securities company.
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If the depository member is a custodian bank, the error correction will be carried out through the proprietary trading account of the securities company that has entered into an agreement on error correction with the custodian bank.
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If the depository member does not have a proprietary trading account, it may open a depository account in its own name to allow the VSDC to temporarily record the number of securities received or to be paid from the error correction. The depository member must immediately sell such securities in the next trading session.
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c) Transaction settlement process:
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Non-Prefunding Investors must have sufficient funds in their accounts before the deadline prescribed for securities companies to have sufficient funds in the payment account to settle securities transactions.
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If a Non-Prefunding Investor fails to ensure sufficient funds, the securities company shall use its own funds to make the payment on behalf of the Non-Prefunding Investor.
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The securities company may use borrowed funds from the payment support fund within the scope of its contribution to make payment on behalf of the Non-Prefunding Investor and shall be subject to penalties if failing to make the payment.
(Note: Payment on behalf of a Non-Prefunding Investor due to insufficient funds is not considered margin lending according to regulations on securities company operations.)
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The securities company may block, release, or request the custodian bank (if the investor has a depository account at the custodian bank) to block or release the number of shares received from the non-funded securities purchase transaction, corresponding to the amount paid by the securities company on behalf of the investor. The blocking or release of such shares shall be carried out on the investor’s account that lacks sufficient funds for payment.
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Non-Prefunding Investors shall confirm with the securities company that they have fulfilled the payment obligation as agreed before the end of the afternoon trading session on the day the securities company pays on behalf of the investor and shall complete the payment in full by the end of the afternoon trading session on the following day. Losses, profits, and related fees incurred from such transactions shall be handled in accordance with the agreement between the securities company and the investor.
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In case the investor fails to confirm, confirms but fails to perform the payment obligation as agreed with the securities company, the securities company may request the VSDC to complete the transfer of ownership of shares recorded on the investor’s account to the proprietary trading account of the securities company on the same day the company makes payment on behalf of the investor.
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The securities company may sell the shares on the trading system from the proprietary account. Losses, profits, and related fees arising from such transactions shall be handled in accordance with the agreement between the securities company and the investor.
3. Guiding regulations on information disclosure in the securities market by securities companies in relation to share transfers from Non-Prefunding Investor accounts to proprietary accounts
a) Clarifying the starting time of the 24-hour information disclosure period for transfer of ownership from Non-Prefunding Investor accounts to proprietary accounts:
According to Circular 96, the 24-hour period for disclosing information about the transfer of ownership from a Non-Prefunding Investor account to a proprietary account due to insufficient payment is counted from the time the investor fails to buy back the shares as prescribed. This can be understood as the time the securities company receives written confirmation from the investor about not executing or not settling the transaction, the time the investor fails to confirm within the prescribed period, or the time the investor fails to pay or fully pay the amount payable according to the agreement with the securities company.
Circular 18 now specifically provides that the 24-hour disclosure period for Non-Prefunding Investors starts from the deadline for making payment to the securities company. This regulation provides clearer grounds for securities companies to comply with their disclosure obligations.
b) Exemption from pre-transaction disclosure of sales of shares received in proprietary accounts:
Normally, insiders and related persons of public companies must disclose information about expected transactions at least 3 working days before the transaction date. However, Circular 18 provides that in case a securities company receives shares from a Non-Prefunding Investor and sells them on the trading system within 4 working days from the date of receiving those shares into the proprietary account, it will be exempted from pre-transaction disclosure requirements applicable to insiders and related persons of public companies.
As for post-transaction disclosure, the securities company must disclose information within 24 hours after the transaction is completed, calculated from:
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The time of completion of ownership transfer of shares to the securities company’s proprietary account from the Non-Prefunding Investor’s account;
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The time when the securities company completes selling the shares received in its proprietary account from the Non-Prefunding Investor on the trading system.
With the above regulations, Circular 18 provides more specific and favorable conditions for foreign institutional investors participating in non-prefunded transactions and for securities companies, custodian banks, and relevant parties to handle arising issues. The establishment of a legal framework for Non-Prefunding transactions is considered a step forward in Vietnam’s process of upgrading the securities market.
Circular 18 takes effect from May 5, 2025.
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