A new regulation taking effect on May 10 is expected to tightly control the formation and operation of securities brokerages and increase their responsibility to investors.
A new regulation taking effect on May 10 is expected to tightly control the formation and operation of securities brokerages and increase their responsibility to investors.
Ministry of Finance Decision No 27/2007/QD-BTC, issued on April 24, attempts to ensure the financial solvency of new brokerages by requiring the founding shareholders of a securities company to contribute at least 20 percent of the initial charter capital of the company.
Initial capital contributed by founding shareholders cannot be transferred, except among other founding shareholders, within three years from the date of the companys license.
The new regulations also stipulates that firms have adequate physical facilities to ensure normal operations, including a trading floor, office equipment, a computer system with software serving securities transactions, and other necessary equipment.
Securities companies will be forced to stop operations if they provide false information when applying to establish companies or suffer a cumulative loss of 50 percent of charter capital and cannot raise additional capital as required.
Any company which does not commence operations within 12 months of being issued a license will have their licenses revoked.
The new regulation stipulates that employees of securities companies can only open personal trading accounts with the securities companies that employ them.
Securities company employees may not use funds or securities in customers accounts without the customers permission in writing.
(Source: VNA)
