Quyết định 31/1999/QD-UBCK6

DECISION

CONCERNING THE ISSUANCE OF THE REGULATION ON THE INSPECTION AND SUPERVISION OF SECURITIES ACTIVITIES AND THE STOCK MARKET

PRESIDENT OF THE STATE SECURITIES COMMISSION

Pursuant to the Ordinance on Inspection dated April 1, 1990;
Pursuant to Decree No.15/CP dated March 2, 1993 by the Government concerning tasks, powers and responsibilities of ministries and ministerial level bodies;
Pursuant to Decree No.75/CP dated November 28, 1996 by the Government concerning the establishment of the State Securities Commission;
Pursuant to Decree No.48/1998/ND-CP dated July 11, 1998 by the Government relating to securities activities and the stock market;
Pursuant to Decree No.61/1998/ND-CP dated August 15, 1998 by the Government concerning the inspection and supervision of enterprises;
According to the proposal of the Chief Inspector of the State Securities Commission;

DECIDES

Article 1: To issue this Decision in connection with the "Regulation on the inspection and Supervision of Securities Activities and the Stock Market".

Article 2: The decision becomes effective 15 days after the date of signing.

Article 3: Chiefs of personnel departments of, chief inspectors and heads of units belonging to the State Securities Commission, the Stock Exchange Centre, organisations and individuals associated to securities activities and the stock market are entrusted with the responsibility of implementing this Decision.

REGULATION

ON THE INSPECTION AND SUPERVISION OF SECURITIES ACTIVITIES AND THE STOCK MARKET
(issued in connection with Decision No.31/1999/QD-UBCK6 dated October 12, 1999 by the President of the State Securities Commission)

Chapter I

GENERAL PROVISIONS

Article 1: The Regulation provides provisions, principles, objectives, contents, methods and processes of the inspection and supervision of securities activities and the stock market. The inspection and supervision of securities activities and the stock market is aimed at the stabilisation, equality, efficiency and publicity of the stock market as well as the protection of the State interest and legal powers and interests of investors.

Article 2:

1. Objectives subject to the inspection and supervision of securities activities include:

a) Organisations issuing shares listed in the collective stock market;

b) The Stock Exchange Centre;

c) Securities companies, securities investment funds, investment fund management companies, members of securities depository, and supervising banks;

d) Entities involved in securities transactions; and

e) Organisations and individuals associated with securities activities and the stock market.

2. Areas of inspection and supervision include:

a) The issuance of shares;

b) Securities transactions;

c) Stock exchange, registration, clearing and settlement and depository; and

d) Information disclosure.

Article 3:

Responsibilities of supervisors and inspectors:

1. The Inspectorate of the State Securities Commission must operate under the direct management of the commission. It is entrusted with responsibility of inspecting and supervising the implementation of policies and legal documents as well as the operations of the Stock Exchange Centre, organisations and individuals associated with the issuance, exchange and providing of securities services.

2. Functional departments of the State Securities Commission are responsible for supervising operations of organisations which are issuing, trading and exchanging stocks and individuals who are operating in the fields of securities in accordance with inforce regulations and laws and within their powers and responsibilities.

3. The Stock Exchange Centre has responsibility for and powers of conducting the inspection and supervision of securities transactions of the Stock Exchange Centre.

4. Organisations providing securities services are responsible for regularly self-supervising their implementation of in-force regulations and laws associated to their business.

Chapter II

SUPERVISION

Article 4:

Based on specific activities, data and reports, the inspection will be analysed and compared with criteria stated in legal documents concerning securities activities and the stock market in order to discover, in a timely manner, shortcomings and violations of organisations issuing, trading and exchanging stocks and individuals operating in the fields of securities.

Functional departments of the State Securities Commission, the Inspectorate of the State Securities Commission and the Stock Exchange Centre are responsible for regularly conducting the supervision effectively.

Article 5:

Regulations on the supervision of the issuance, listing securities and disclosing information include:

1. Analysing applications for issuing and listing securities;

2. Supervising and analysing the obedience of regulations on the disclosure of information;

3. Analysing the transferability of shares and bonds;

4. Analysing the payable capabilities of principles and dividends of shares and bonds;

5. Considering serious damages, such as stopping production, changing business lines, and separating or merging companies which influence prices of saleable shares and bonds of companies; and

6. Foreseeing trends of securities issued and listed.

Article 6:

The supervision of operations of the Stock Exchange Centre includes the following activities:

1. Analysing the selling and buying of securities as well as the fluctuation of prices and securities sale volume to discover signs of disorder in securities transactions;

2. Conducting the supervision aimed at the discovery of insider trading or market and price manipulating trading activities;

3. Examining the possession of domestic and foreign investors;

4. Investigating rumours influencing market prices; and

5. Foreseeing developing trends in the market.

Article 7:

The supervision of financial powers and operations of organisations trading and providing securities services include the following activities:

1. Maintenance of liquidity capital and assets;

2. Quality of possessed assets;

3. Trading performances;

4. Equity capital;

5. State Budget's obligatory;

6. Evaluations of management and organising results of organisations trading and providing securities services; and

7. Supervisions of the application of regulated conditions when granting operation licences.

Chapter III

INSPECTION

Article 8:

Based on results of supervision, functional departments of the State Securities Commission and the Stock Exchange Centre are responsible for discovering signs of shortcomings and violations to, in a timely manner, report to the Inspectorate of the State Securities Commission.

Annually, the Inspectorate of the State Securities Commission is responsible for regularly or suddenly without notice inspecting operations of organisations and individuals subject to the inspection of the Inspectorate upon the nature or levels of shortcomings and violations.

Article 9:

The inspection applicable to share issuing organisations must be focused on doubtful or erroneous signs in the issuance and listing of securities as well as the disclosure of information, which include:

a) The accuracy, adequacy and legitimacy of applications for issuing and listing securities;

b) The accuracy, adequacy and punctuality of the information disclosure;

c) Mortgage assets (if any) and guarantee of the issuance;

d) The obedience of safety conditions in accordance with in-force regulations;

e) The establishment of funds used to pay principals and interests of bonds; and

f) Damages and corrective measures.

Article 10:

Inspectors who are responsible for inspecting operations of the Stock Exchange Centre are required to pay attention to the fixation of time which will also be regarded as a basis for the inspection. It can be the date when the price and securities sales volume surpass regulated criteria (applicable to doubtful cases of market manipulating trading activities) or the price and securities sales volume begin fluctuating before disclosing information (applicable to doubtful cases of insider trading activities), which include:

a) The volume of securities issued publicly;

b ) Price index and transactional volume of securities with doubtful signs;

c) Statistics and documents of intermediary companies and main investors involved in the securities transations;

d) Definitions of causes triggering daily changes in prices and securities sales volume; and

e) Analysing relations and information:

* Relations between insiders of shares issuing organisations and collective investors;

* Relations among large investors concerning accounts, prices and securities sales volume;

* The selling and buying of collective securities, large securities sales volume; and large scale transactions, and

* Securities transactions with signs of violation.

Article 11:

Inspections of financial powers and operations of organisations trading and providing securities services, which include:

1. Inspections of the operational nature of securities:

* The obedience of regulations on opening and managing securities transaction accounts of customers;

* The appropriateness of the brokerage and private business professions;

* The obligatory of catching information related to customers; and

* The obedience of regulations on brokerage and private business.

2. Inspections of unfair actions:

* The collection of charges and fees by customers surpassing regulated levels;

* Timely and completely sending notices on recognising transactional results to customers;

* Actions that obligatorily request customers to be involved in securities transactions; and

* Actions that force, incite and mobilise customers to the speculation of securities.

3. Inspections of financial powers:

* The portion of the net liquidity capital counted at the time of inspection which will be compared with those of previous periods;

* Portions of investment capital contributions which will be compared with the regulated levels;

* Investment quality of private business securities; and

* Income sources from trading, brokerage, private business and issuing guarantee;

4. Inspections of accounting activities:

* Opening book-entry systems, and archiving documents and book-keeping systems;

* The legitimacy of the book-keeping systems; and

* The accuracy, adequacy and punctuality of the accounting balance.

5. Inspections of inside operation controls:

* The obedience of regulations on the inside operation controls;

* Quality and efficiency of the inside operation controls; and

* Co-operative relations between inside operation controls with outside auditing activities and Sate-owned securities management bodies.

Article 12:

Inspections applicable to members of the State Securities, Commission must follow regulations stated in the decision on inspection by the President of the State Securities Commission.

Main regulations are as follows:

a) Quality of inside operation controls and supervisions of members as regulated;

b) The obedience of regulations on the settlement of obstacles, complaints and accusations; and

c) Other regulations set forth by the President of the State Securities Commission.

Article 13:

1. The President of the State Securities Commission and the Chief Inspector of the State Securities Commission are authorised to determine the inspections on organisations and individual, who are involved in securities issuance, trading and transactions.

2. The director of the Stock Exchange Centre is authorised to determine the examinations on all securities transactions of the Stock Exchange Centre.

3. Decisions on inspections and examinations are required to include all legal bases, contents, requirements, areas and terms of inspection and examinations, as well as the powers and responsibilities of the Inspectorate.

4. Inspected and examined organisations must know in advance the inspection and examination at least seven days, before the decisions on inspections and examination are announced, excluding sudden cases.

5. Term of inspections:

a) The term of inspections cannot exceed 30 days:

a) In case of necessity, those who are authorised to determine the inspection are eligible to extend the term which, however, cannot exceed 30 days; and

b) The term of inspections is within the date of announcing the decision on inspections to the inspected organisation and the date of announcing results of the inspection.

6. Term of examinations:

a) The term of examinations cannot exceed five days from the date of announcing the decision on examinations; and

b) In case of necessity, those who are authorised to determine the examination are eligible to extend the term of examinations which, however, cannot exceed regulated levels for each examination.

Chapter IV

STIPULATIONS ON MAKING REPORTS

Article 14:

Organisations involved in securities issuance, trading and transactions; and individuals doing business in the field of securities, which are under the inspection and supervision of the State Securities Commission, are required to, in a timely manner, provide inspectors of the State Securities Commission, functional departments of the State Securities Commission, and the Stock Exchange Centre with appropriate and accurate information and reports in accordance with stipulations stated in the Regulation on Information and Reports.

Article 15:

Functional departments of the State Securities Commission, Stock Exchange Centre, securities companies and investment fund management companies are required to, annually and quarterly, send inspectors of the State Securities Commission reports on results of inspections, supervisions, examinations, inside operation controls, and settlement of complaints and accusations.

Inspectors of the State Securities Commission are required to monthly send the President of the State Securities Commission reports on the directions and implementations of results of inspections and supervisions; and annually and quarterly send the President of the State Securities Commission and the State Chief Inspector reports on results of inspections, supervisions, and settlements of complaints and accusations.

Chapter V

AWARDS AND PENALTIES

Article 16:

Staff, officials, co-ordinators, inspectors and inspectorates, who succeed in the inspection, supervision, and examination of securities activities, will receive awards in accordance with State regulations.

Article 17:

Those who take advantage of their post and powers of inspection and supervision of securities activities and the stock market to serve their own interests and purposes, and violate legal interests of inspected and supervised organisations and individuals; and those who hinder, bribe or retaliate against inspectors and co-ordinators of inspectorates, or violate other regulations concerning the inspections and supervisions of securities activities and the stock market will be administratively punished or prosecuted in terms of their criminal liability in accordance with in-force regulations and laws.

Chapter VI

IMPLEMENTATIONS

Article 18:

1. The Chief Inspector of the State Securities Commission is responsible for providing guidance on the implementation of this Regulation.

2. The President of the State Securities Commission authorised to determine the amendment of and addition to this Regulation.