Stricter rules to strengthen securities businesses
Stricter rules to strengthen securities businesses
Securities company operations will be strengthened from January 15 under new regulations circulated by the Ministry of Finance and prompted by scandals surrounding securities companies.
The ratio of total debts over total equity capital of a securities firm will be cut from the current 6 times to not over 3 times. The new regulation also gives details on eligible total debt value, which does not include investor deposits, bonuses and welfare funds or compensation for investor losses.
Securities companies will not be permitted to invest in real estate, except for the purpose of making a property their headquarters, branch or transaction office. The value of property purchases will not exceed 50 per cent of total asset value of a company.
Securities firms will not be allowed to use more than 70 per cent of their equity to buy corporate bonds or make capital contributions to other companies. Investments in listed companies also may not exceed 20 per cent of their equity.
However, the circular also opens a door for the investment of securities companies. A fund management company is allowed to hold more than 20 per cent of the outstanding shares of a listed company but not over 15 per cent of a unlisted company.
A securities company having associated companies can record profits of these companies into its financial statement based on the capital contribution rate. In addition, they are not required to make provision for such investments.
Only Saigon Securities Inc (SSI) has seven associated companies and all of them are listed. Combined profits from these companies to SSI were VN?89 billion (US$4.2 million) in the first nine months of this year.
SSI chairman Nguyen Duy Hung said profits from long-term investments in affiliate companies helped SSI complete its business goals.
However, in the context that most securities companies were struggling to survive on the market, the new regulations were strictly requiring companies to set up a risk control system. Also in bid to curb the prevailing situation in which many companies had abused customers' deposit accounts, the circular forces companies to separate accounts of customers from those of the company.
The circular also gives details on procedures of merging securities companies as well as regulations on the dissolution and bankruptcy of securities companies if they fail to meet new operation requirements of the State Securities Commission.
Circular 210/2012/TT-BTC takes effect from January 15, 2013, and will replace Decision 27/2007/Q?-BTC guiding the establishment and operation of securities companies.
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