On October 30, 2024, the Board of Members of the Vietnam Securities Depository and Clearing Corporation (VSDC) issued Decision No. 48/QD-HĐTV (“Decision No. 48”) promulgating the Regulations on Clearing and Settlement of Securities Transactions at VSDC, replacing Decision No. 15/QD-HĐTV. The new Regulations are issued to supplement the securities transaction settlement process in compliance with the regulations allowing foreign institutional investors (“Flls”) to purchase shares without requiring sufficient funds upon order placement as stipulated in Circular No. 68/2024/TT-BTC ("Circular No. 68"). In today's article, ATA Legal Services would like to highlight some notable new provisions in Decision No. 48.
1. Verification of payment capability for equity, fund unit, and secured warrant transactions by foreign institutional investors
Decision No. 48 mandates that Depository Members (DM) verify the settlement capability of buy orders placed by non-resident retail investors who do not provide full upfront payment. If the investor lacks sufficient funds, the securities company or depository bank must notify VSDC and transfer the underfunded transaction to their proprietary trading account for settlement.
According to Decision No. 48, the Depository Member (DM) is required to confirm the secured/unsecured settlement capability for buy orders of the Flls that do not require full payment at order placement. In the event of insufficient funds from the Flls, the securities company (for Flls opening depository accounts at securities companies) or the depository bank (for Flls opening depository accounts at depository banks) shall send a written notification to VSDC requesting approval or rejection of the payment and transfer the underfunded transaction to the proprietary trading account of the securities company where the Flls placed the order for settlement.
2. Postponing the settlement of securities trades
If the DM lacks sufficient funds or securities within the specified timeframe, settlement will be delayed.
In the event of a transaction involving a shortage of funds, to ensure the ability to make payments, VSDC will hold the seller's securities until the transaction is completed.
In order to secure the settlement of transactions where securities are insufficient, the receiving DM is required to deposit funds into the clearing account in accordance with the prescribed timeline. These funds will be frozen until the transaction is finalized. If the member fails to maintain sufficient funds to meet this requirement, VSDC will deem the member as temporarily unable to meet its payment obligations and may issue a warning or take disciplinary actions as outlined in the DM Regulations.
Decision No. 48/QĐ-HĐTV takes effect from November 02, 2024.
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