DECREE

ON SANCTIONS AGAINST ADMINISTRATIVE VIOLATIONS IN THE FIELD OF SECURITIES AND SECURITIES MARKET

THE GOVERNMENT

Pursuant to the September 30, 1992 Law on Organization of the Government;
Pursuant to the July 6, 1995 Ordinance on the Handling of Administrative Violations;
At the proposal of the Chairman of the State Securities Commission,

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1.- Regulations scope and objects

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2. Administrative violations in the field of securities and securities market include:

a/ Violations of regulations on securities issuing activities;

b/ Violations of regulations on securities transactions;

c/ Violations of regulations on securities trading, registration, clearing and custody activities;

d/ Violations of the reporting and information disclosing regime, and obstructing inspection and examination activities.

3. All Vietnamese organizations and/or individuals that commit acts of administrative violation in the field of securities and securities market shall be sanctioned according to this Decree.

Foreign organizations and/or individuals that commit violation acts in the field of securities and securities market on the territory of the Socialist Republic of Vietnam shall also be administratively sanctioned according to this Decree, except otherwise provided for by relevant international treaty(ies) which Vietnam has signed or acceded to.

Article 2.- Sanctioning forms and other measures

1. For each act of administrative violation in the field of securities and securities market, the violating organization or individual shall be subject to either of the two following forms of principal sanction:

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Fine: The fine levels shall comply with the fine bracket specified in this Decree. For violations with extenuating circumstances, lower fine levels shall be imposed, but must not be lower than the minimum level of the fine bracket. For violations with aggravating circumstances, higher fine levels shall be imposed, but must not exceed the maximum level of the fine bracket.

2. Depending on the nature and seriousness of their violations, violating individuals and/or organizations may also be subject to one or several of the following forms of additional sanction:

a/ Stripping of the right to use securities issuance licenses, securities trading operation licenses and/or securities trading practice licenses for a definite or indefinite time;

b/ Confiscation of all amounts earned from the commission of violation acts as well as securities volumes involved in violation acts.

3. In addition to the sanctioning forms prescribed in Clauses 1 and 2 of this Article, violating organizations and/or individuals may also be subject to one or several of the following measures:

a/ Compelled restoration of the prescribed safety rates or the initial state;

b/ Compelled cancellation or correction of erroneous or untrue information;

c/ Compelled compensation for damage caused by administrative violations, according to provisions of law.

The additional sanctioning forms and other measures prescribed in Clauses 2 and 3 of this Article shall be applied in really necessary cases, aiming to thoroughly handle violations, do away with causes and conditions for further violations and overcome consequences caused by administrative violations in the field of securities and securities market.

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1. The statute of limitations for sanctioning an administrative violation in the field of securities and securities market shall be two years from the date such administrative violation is committed. Past the said time limit, no sanction shall be imposed, but the measure of compelled restoration of the initial state wrecked by such administrative violation may be applied.

2. An individual, who has committed an act of violating the regulations on securities and securities market and been subject to lawsuit, prosecution or a decision to bring the case to trial according to the criminal procedures, then a decision to suspend the investigation or the case, shall be administratively sanctioned if he/she had committed an administration violation act prescribed in this Decree. The statute of limitations for sanctioning the administrative violation shall be three months from the date the above-said suspension decision is issued.

3. Within the time limits prescribed in Clauses 1 and 2 of this Article, if the violating organizations and/or individuals commit new acts of administrative violation in securities and securities market activities or intentionally evade or impede the sanctioning, the statute of limitations prescribed in Clauses 1 and 2 of this Article shall not apply.

4. If over one year after the sanctioning decision is either completely executed or invalidated, the administratively sanctioned organization or individual does not relapse into violations, it/he/she shall be regarded as having never been sanctioned for administrative violations.

Chapter II

VIOLATION ACTS AND SANCTIONING FORMS

Section I. VIOLATIONS OF THE REGULATIONS ON THE ISSUANCE OF SECURITIES TO THE PUBLIC

Article 4.- Sanctions against acts of violating the regulations on the issuance of securities to the public

1. A fine of between 5,000,000 and 10,000,000 VND shall be imposed for one of the following violation acts:

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b/ Using information outside the prospectus to probe the market before being permitted to issue securities;

c/ Distributing securities before making the issuance announcement;

d/ Issuing securities at variance with the contents inscribed in the issuance licenses regarding the securities volume and types, issuance time limit;

e/ Announcing the securities issuance on the mass media at variance with the prescribed contents and time, or registering the issuance but failing to clearly announce information on the right to vote, right to register for securities purchase, right to convert securities and other rights of shareholders and investors.

2. A fine of between 10,000,000 and 20,000,000 VND shall be imposed on organizations and/or individuals that take part in the compilation of dossiers of application for the issuance of securities to the public (including audit report, asset assessment report and documents for signing issuance underwriting commitments), for forgeries in the dossiers of application for the issuance.

3. A fine of between 20,000,000 and 50,000,000 VND shall be imposed for acts of issuing securities to the public without licenses.

4. Additional sanctioning forms:

a/ Stripping of the right to use securities issuance licenses for 60 days, for violations prescribed in Clause 1 of this Article;

b/ Stripping of the right to use securities issuance licenses indefinitely, for cases of relapse into violations prescribed in Clause 1 or violations prescribed in Clause 2 of this Article.

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5. Application of other measures:

In cases where an issuing organization is subject to an additional sanction prescribed at Point a or b, Clause 4 of this Article, and the investors request the cancellation of their subscriptions or return the already purchased securities, such issuing organization shall have to withdraw the already issued securities; reimburse securities purchase money or deposits and have to pay the interests on such purchase money amounts or deposits to the purchasers at the demand interest rate of the designated payment bank within 30 days counting from the date the decision on issuance suspension or decision on withdrawal of the securities issuance license is issued.

Section II. VIOLATIONS OF THE REGULATIONS ON SECURITIES TRANSACTIONS

Article 5.- Sanctions against acts of violating the regulations on securities transaction activities

1. A fine of between 20,000,000 and 50,000,000 VND shall be imposed for one of the following acts:

a/ Conducting by oneself or in collusion with other persons simultaneously the purchase and sale of one kind of securities in order to create sham supply-demand state or false prices;

b/ Conducting securities purchase or sale transactions without effecting the transfer of securities ownership in order to change market prices of such kind of securities;

c/ Using or disclosing internal information to other persons, so that the latter effect their securities purchase and/or purchase subscription, or securities sale and/or sale offer;

d/ Fabricating and spreading untrue information in order to change securities prices, thus causing interference on securities market;

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f/ Selling securities in all forms while not owning the securities at the time of transaction;

g/ Purchasing and/or selling securities listed outside the Securities Trading Center and/or the Stock Exchange;

h/ Organizing the issuance or effecting the re-purchase and/or re-sale of one’s own securities without permission of the State Securities Commission.

2. Additional sanctioning forms:

a/ Stripping of the right to use the securities trading operation licenses for a period of 45 days, which may be extended for another 15 days, for violations prescribed in Clause 1 of this Article. If past the said time limit, the violators still fail to remedy their violations, they shall be stripped of the right to use the securities trading operation licenses indefinitely;

b/ Confiscation of all amounts earned from the commission of administrative violation acts prescribed in Clause 1 of this Article.

3. Application of other measures:

a/ Compelled restoration of the initial state, for violations prescribed at Points f, g and h, Clause 1 of this Article;

b/ Compelled compensation for damage caused to investors, for violations prescribed at Points a, b, c and e, Clause 1 of this Article.

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1. A fine of between 5,000,000 and 10,000,000 VND shall be imposed for one of the following violation acts:

a/ Organizations and/or individuals conduct securities purchasing and/or selling transactions, thus changing their holding of 5% or more of voting shares or no longer holding 5% of voting shares of an issuing organization, without reporting such to the Securities Trading Center or the Stock Exchange within 24 hours;

b/ Organizations, individuals or persons involved in the securities purchase who purchase securities in order to hold more than 25% of voting shares of an issuing organization without going through a public bidding according to the State Securities Commission’s regulations;

c/ Founding shareholders hold less than 20% of equity capital of an issuing organization or the holding time has not yet attained the prescribed minimum level of 3 years after the issuance is finished.

2. A fine of between 20,000,000 and 50,000,000 VND shall be imposed on foreign organizations and/or individuals that conduct securities transactions and purchase in order to hold shares or bonds of an issuing organization beyond the level prescribed by law.

3. Application of other measures:

Compelled restoration of the exact prescribed rates, for violations prescribed at Points b and c, Clause 1, and Clause 2 of this Article.

Section III. VIOLATIONS OF THE REGULATIONS ON SECURITIES TRADING, REGISTRATION, CLEARING AND CUSTODY ACTIVITIES

Article 7.- Sanctions against acts of violating the regulations on securities trading operation and service licenses

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a/ Using names not in consistency with those stated in operation licenses or licenses to set up representative offices already granted;

b/ Conducting activities in contravention of the charters or amending the charters without the State Securities Commission’s consent;

c/ Organizing the commencement of operations while having not fully satisfied the conditions prescribed by law.

2. A fine of between 10,000,000 and 20,000,000 VND shall be imposed for one of the following violation acts:

a/ Conducting securities trading or providing securities services while having not yet been granted the licenses therefor;

b/ Lending, leasing or assigning licenses;

c/ Conducting securities trading or providing securities services in those fields not prescribed in the license or when the license has already expired;

d/ Erasing and/or modifying operation licenses or licenses for opening branches or licenses for setting up representative offices;

e/ Relocating or changing head offices, shutting down or opening more branches and/or representative offices, replacing directors or deputy directors (general directors or deputy general directors) of securities trading organizations without the State Securities Commission’s consent;

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3. Additional sanctioning forms:

a/ Confiscation of all collected amounts, for violations prescribed at Points a, b and c, Clause 2 of this Article;

b/ Stripping of the right to use trading operation licenses for a period of 30 days, which may be extended for another 15 days, for violations prescribed at Point b, Clause 1; Points b, c, d and e, Clause 2 of this Article;

Article 8.- Sanctions against acts of violating the regulations on trading activities of securities trading organizations

1. A fine of between 5,000,000 and 10,000,000 VND shall be imposed on securities firms for one of the following violation acts:

a/ Failing to maintain a sufficient liquidity capital as prescribed by law;

b/ Procuring facilities, equipment and fixed assets with value exceeding 50% of the charter capital;

c/ Investing more than 20% of the total value of a listed organization’s securities currently in circulation;

d/ Investing more than 15% of the total value of a unlisted organization’s securities currently in circulation;

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f/ Failing to make adequate deductions for setting up reserve funds for charter capital supplements or using such funds in contravention of law provisions.

2. A fine of between 5,000,000 and 10,000,000 VND shall be imposed on investment fund managing companies if they commit one of the following violation acts:

a/ Failing to maintain a sufficient working capital as prescribed by law;

b/ Investing capital and assets of a fund with value in excess of 15% of the total value of an issuing organization’s securities currently in circulation or investing more than 10% of the total value of a fund’s assets in an issuing organization’s securities currently in circulation;

c/ Investing capital and assets of funds with value in excess of 49% of the total value of securities of an issuing organization or a unlisted organization currently in circulation;

d/ Using capital and assets of a fund for investment with value in excess of 10% of the equity capital of a unlisted organization or investing more than 5% of the total value of a fund’s assets in a unlisted organization;

e/ Investing more than 30% of the total value of a fund’s assets in companies in the same group of companies, which are bound together in interdependent ownership relations;

f/ Using capital and assets of a fund to directly invest in real estate exceeding 10% of such fund’s value.

3. A fine of between 10,000,000 and 20,000,000 VND shall be imposed on securities firms if they commit one of the following violation acts:

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b/ Failing to separate the dealing operation from brokerage operation for clients.

4. A fine of between 20,000,000 and 50,000,000 VND shall be imposed on securities firms and investment fund managing companies if they commit one of the following violation acts:

a/ Taking part in securities credit and lending activities;

b/ Using capital and assets of securities investment funds for lending or guarantee;

c/ Using capital of an investment fund to invest in or to purchase assets of another fund under their management.

5. Additional sanctioning forms:

a/ Stripping of the right to use the trading operation licenses for a period of 30 days, which may be extended for another 15 days, for cases of relapse into violations prescribed in Clauses 1, 2 and 3 of this Article;

b/ Stripping of the right to use trading operation licenses for an indefinite time, for cases of relapse into violations prescribed in Clause 4 of this Article; or for case of failing to overcome the consequences of violations prescribed in Clauses 1, 2 and 3 of this Article even when the time limit for stripping of the right to use the business operation license is over.

6. Application of other measures

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Article 9.- Sanctions against acts of violating the regulations on securities trading practitioners

1. A fine of between 5,000,000 and 10,000,000 VND shall be imposed on securities trading and service companies that commit one of the following violation acts:

a/ Disposing persons without practice licenses to perform operations that require practice licenses as prescribed by the State Securities Commission.

b/ Failing to replace or transfer to other positions persons, who have their practice licenses withdrawn under the State Securities Commission’s decisions or are compelled to transfer to other jobs.

2. The right to use practice licenses shall be deprived in cases where:

a/ Securities trading practitioners simultaneously work for or contribute capital to two or more securities firms; act as directors, Managing Board members or shareholders holding more than 5% of the voting shares of issuing organizations; lend out their securities trading practice licenses;

b/ Persons having practice licenses personally take part in the short-sale of securities not under their ownership at the time of transaction; purchase securities while the issuing organizations have not yet disclosed information to the public; disclose and/or disseminate untrue information; take part in securities credit and lending activities; take part in the market control and manipulation activities.

Article 10.- Sanctions against acts of violating the regulations on responsibilities of supervisory banks

1. A fine of between 5,000,000 and 10,000,000 VND shall be imposed for one of the following violation acts:

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b/ The supervisory bank engaged in the asset preservation breaches the contract for management and supervision in securities investment already signed with a fund managing company.

2. Additional sanctioning forms:

Stripping of the right to use securities custody licenses for a period of 30 days, which may be extended for 15 days, for violations prescribed at Points a and b, Clause 1 of this Article. If past such time limit, the violators still fail to overcome consequences of the violations, they shall have their license use right deprived indefinitely.

Article 11.- Sanctions against acts of violating the regulations on securities registration, clearing and custody

1. A fine of between 5,000,000 and 10,000,000 VND shall be imposed on securities registration, clearing payment and/or custody organizations that commit one of the following violation acts:

a/ Lending securities on clients’ accounts or pledging clients’ securities;

b/ Violating the regulations on the time limit for certifying securities balance, transferring the ownership over securities, or modifying or forging vouchers in payment for securities transfers, thus causing material losses to clients;

c/ Violating the regime of preserving and keeping securities, the regime of keeping original vouchers on securities registration, payment and keeping;

d/ Failing to fully, accurately and promptly supply the list of securities holders and relevant documents to the issuing companies.

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Confiscation of amounts earned from the commission of violation acts prescribed at Point a, Clause 1 of this Article.

3. Application of other measures:

Compelled compensation for damage caused by violations prescribed in Clause 1 of this Article.

Section IV. VIOLATIONS OF THE REPORTING AND INFORMATION DISCLOSING REGIME AND OBSTRUCTING INSPECTION AND EXAMINATION ACTIVITIES

Article 12.- Sanctions against acts of violating the regulations on the reporting regime in securities trading activities

1. A warning shall be served for one of the following violation acts:

Submitting incomplete reports, failing to submit reports within the prescribed time limit or submitting reports made not according to the form set by the State Securities Commission.

2. A fine of between 200,000 and 1,000,000 VND shall be imposed for a relapse into one of the violations prescribed in Clause 1 of this Article.

3. A fine of between 5,000,000 and 10,000,000 VND shall be imposed for one of the following violation acts:

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b/ A securities firm, investment fund-managing company or securities custody organization fails to report or has reported but not in time the occurrence of unusual events that may severely affect the financial capabilities and business operations of such securities firm, investment fund managing company or securities custody organization.

4. Additional sanctioning forms:

Stripping of the right to use securities trading operation licenses for a period of 30 days, which may be extended for another 15 days, in cases where securities firms, investment fund-managing companies and/or securities custody organizations commit violations prescribed at Points a and b, Clause 3 of this Article. If past such time limit, the violators still fail to remedy their violations, they shall have their securities trading operation licenses deprived indefinitely.

Article 13.- Sanctions against acts of violating the regulations on information disclosure

1. A fine of between 5,000,000 and 20,000,000 VND shall be imposed for one of the following violation acts:

a/ Failing to supply information adequately, promptly, periodically and at the places prescribed by law;

b/ Supplying untrue information and reports;

c/ Revealing confidential data and documents, but not seriously enough for penal liability examination;

d/ Announcing changes in the already publicized important information contents without explaining and reporting them to the State Securities Commission, the Securities Trading Center and the Stock Exchange;

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2. Application of other measures:

a/ Compelled cancellation or correction of erroneous and/or untrue information;

b/ Compelled compensation for damage caused by information disclosing organizations to investors, in cases of violations of the regulations on information disclosure.

Article 14.- Sanctions against acts of obstructing the inspections and examinations or failing to realize the inspectors’ proposals

1. A warning shall be served to securities issuing, trading and transaction organizations and/or individuals engaged in securities activities that commit one of the following violation acts:

Delaying, shirking or resisting the full and timely supply of documents, vouchers and/or data at the requests of inspection organizations, inspection delegations or inspectors while they are on duty;

2. A fine of between 200,000 and 1,000,000 VND shall be imposed for cases of relapse into one of the violations prescribed in Clause 1 of this Article.

3. A fine of between 5,000,000 and 10,000,000 VND shall be imposed for one of the following violation acts:

a/ Failing to execute handling decisions of inspection delegations;

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c/ Removing, relocating or taking other acts to change the status quo of sealed money and securities, accounting books, files and vouchers or other sealed material evidences and means without permission.

Chapter III

SANCTIONING COMPETENCE AND PROCEDURES

Article 15.- Sanctioning competence

1. Specialized inspectors of the State Securities Commission may:

a/ Serve warnings;

b/ Impose fines of up to 200,000 VND;

c/ Compel the restoration of the exact prescribed safety rates or initial state;

d/ Compel the cancellation or correction of erroneous or fabricated information.

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a/ Serve warnings;

b/ Impose fines of up to 20,000,000 VND;

c/ Strip of the right to use securities issuing licenses, securities trading operation licenses and securities trading practice licenses for a definite or indefinite time;

d/ Confiscate for public funds all amounts earned from the commission of violation acts and the securities volumes involved in violations acts;

e/ Compel the restoration of the exact prescribed safety rates or initial state;

f/ Compel the cancellation or correction of erroneous or untrue information;

g/ Compel the compensation for damage caused by administrative violation acts.

3. The presidents of the provincial People’s Committees may sanction, according to the competence defined in Article 28 of the Ordinance on the Handling of Administrative Violations within the geographical areas under their respective management, the administrative violations in the field of securities and securities market prescribed in this Decree.

Article 16.- Authorized sanctioning

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Article 17.- Sanctioning procedures

The procedures for sanctioning administrative violations in the field of securities and securities market shall comply with the provisions of the Ordinance on the Handling of Administrative Violations.

Article 18.- Execution of sanctioning decisions and coerced execution of sanctioning decisions

1. Organizations and/or individuals sanctioned for their administrative violations according to this Decree shall have to strictly execute sanctioning decisions of the persons competent to sanction administrative violations in the field of securities and securities market. Failing to execute the sanctioning decisions or intentionally shirking the execution of sanctioning decisions, the violators shall be coerced to do so according to Article 55 of the Ordinance on the Handling of Administrative Violations.

The finance and banking agencies, the people’s police forces and local administrations of all levels shall have to coordinate with one another in enforcing coercive decisions of the persons competent to sanction administrative violations in the field of securities and securities market.

2. When applying coercive measures for the execution of administrative violation sanctioning decisions, the competent agencies and persons shall have to comply with the coercion order and procedures as prescribed by law.

Chapter IV

COMPLAINTS, DENUNCIATIONS AND HANDLING OF VIOLATIONS

Article 19.- Complaints and/or denunciations and settlement thereof

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In cases where the complaining organizations and/or individuals disagree with the complaint settling decisions, they may lodge further complaints to persons with higher competence to settle complaints or initiate administrative lawsuits at the court according to provisions of law.

2. Individuals may denounce to the competent State agencies acts of administrative violation prescribed in this Decree, which are committed by organizations and/or individuals, according to provisions of the 1998 Law on Complaints and Denunciations.

3. Individuals may denounce to the competent State agencies illegal acts committed by persons competent to sanction administrative violations defined in Article 15 of this Decree.

Article 20.- Handling of violations

1. Persons competent to sanction administrative violations in the field of securities and securities market, who tolerate or cover up violating organizations and/or individuals, fail to impose sanctions or impose sanctions not according to law provisions or impose sanctions beyond their prescribed competence, shall, depending on the nature and seriousness of their violations, be disciplined or examined for penal liability. If material loss is caused, they shall have to make compensation therefor according to law provisions.

2. Sanctioned persons who take acts against persons on duty, delay or shirk the execution of sanctioning decisions or commit other violation acts shall, depending on the nature and seriousness of their violations, be administratively handled or examined for penal liability. If material loss is caused, they shall have to make compensation therefor according to law provisions.

Chapter V

IMPLEMENTATION PROVISIONS

Article 21.- Implementation effect

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Article 22.- Implementation guidance and responsibility

The Chairman of the State Securities Commission shall have to guide in detail the implementation of this Decree.

The ministers, the heads of the ministerial-level agencies, the heads of the agencies attached to the Government and the presidents of the People’s Committees of the provinces and centrally-run cities shall have to implement this Decree.

ON BEHALF OF THE GOVERNMENT
FOR THE PRIME MINISTER
DEPUTY PRIME MINSTER




Nguyen Tan Dung