Decision No. 62/QD-BTC on Approving the Plan for Restructuring Securities Companies

MINISTRY OF FINANCE

SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness

No.: 62/QD-BTC

Hanoi, January 10, 2012

DECISION

On approving the Plan for Restructuring Securities Companies

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MINISTER OF FINANCE

Pursuant to Decree No. 118/2008/ND-CP dated November 27, 2008 of the Government regulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

At the request of the Chairman of the State Securities Commission,

DECIDES:

Article 1.

Approve the Plan for Restructuring Securities Companies (hereinafter referred to as the Plan) with the following main contents:

1. Purpose of restructuring securities companies

1.1. Enhance the quality of operations, financial capacity, corporate governance, and risk control capabilities of securities companies. On this basis, gradually reduce the number of securities companies.

1.2. Strengthen the capacity and efficiency of management and supervision over securities company activities.

1.3. Open the financial services market according to the committed integration schedule.

2. Principles and viewpoints for restructuring securities companies

2.1. The restructuring of securities companies shall be implemented according to a schedule, with cautious and steady steps, without disrupting the operations of the securities market as well as the socio-economic activities of the country, ensuring the legitimate interests of customers.

2.2. Securities companies shall implement restructuring based on legal regulations, the schedule of the Restructuring Plan, and under the management and supervision of the State Management Agency.

2.3. Properly handle the relationship between securities companies, banks, and insurance organizations to ensure risk management, while utilizing market operations to restructure through transparent capital contribution mechanisms.

3. Content of the Restructuring Plan

3.1. Criteria and classification of securities companies

Based on Circular No. 226/2010/TT-BTC dated December 31, 2010 of the Ministry of Finance regulating financial safety indicators and handling measures for securities business organizations that do not meet financial safety indicators (hereinafter referred to as Circular 226/2010/TT-BTC), and other documents guiding securities and the securities market, as well as the audited business results of securities companies, a review and grouping of securities companies shall be conducted based on decreasing levels of risk using the following two indicators: Available capital/total risk (including market risk, settlement risk, and operational risk) and the ratio of accumulated losses/chartered capital. Specifically:

• Group 1 - Normal Group: This group includes securities companies with a ratio of available capital/total risk above 150% and having a profit or accumulated losses below 30% of chartered capital.

• Group 2 - Controlled Group: This group includes securities companies with a ratio of available capital/total risk below 150% but above 120% and having accumulated losses from 30% to 50% of chartered capital.

• Group 3 - Special Control Group: This group includes securities companies with a ratio of available capital/total risk below 120% and having accumulated losses above 50% of chartered capital.

3.2. Restructuring measures

a) Immediate handling measures (from now until April 1, 2012)

For securities companies whose ratio of available capital/total risk does not meet the regulations of Circular 226/2010/TT-BTC, the State Securities Commission will apply the following measures:

• Require these securities companies to implement weekly reporting (for securities companies with a ratio of available capital/total risk below 150%) and daily reporting (for securities companies with a ratio of available capital/total risk below 120%);
• Dispatch inspection teams to assess the company's operational status; if it is found that the company has not separated investor assets, require the securities company to do so within a maximum period of 02 months; request the Board of Directors (Members' Council) to consider and submit to the General Meeting of Shareholders (Owners) a plan for increasing chartered capital;
• Direct the two Stock Exchanges and the Vietnam Securities Depository to strictly control the transaction settlement issues of the company;
• In cases of continuous violations regarding insufficient settlement funds or misuse of customer deposits, consider revoking the securities brokerage license according to legal regulations.

b) Measures applied by group from after April 1, 2012

• For Group 1 - Normal Group: Continue to review and monitor the financial status of this group to provide timely solutions if the market continues to face difficulties.

• For Group 2 - Controlled Group: Apply administrative and economic solution groups according to the regulations of Circular 226/2010/TT-BTC.

• For Group 3 - Special Control Group: Apply administrative and economic solution groups according to the regulations of Circular 226/2010/TT-BTC.

c) Measures implemented from after 2012

Strengthen the governance capacity and operations of securities companies based on three main pillars: Regulations on capital adequacy levels; Regulations on guidelines for risk management frameworks for securities companies; Evaluation and rating of securities business organizations according to international practices, thereby classifying and supervising these organizations.

4. Organization of Implementation

a) Completion of legal documents

• The State Securities Commission shall propose to the Ministry to issue a Circular guiding the organization and operation of securities companies (replacing the Regulation issued alongside Decision No. 27/2007/QD-BTC dated April 24, 2007 of the Minister of Finance). This will adjust and supplement new contents regarding corporate management, financial safety management, and guidelines for mergers and acquisitions of securities companies.

• The Banking Finance Department shall study and propose to the Ministry to issue a Circular guiding the financial management of securities companies (replacing Circular No. 11/2000/TT-BTC dated February 1, 2000 of the Ministry of Finance guiding the financial regime for joint stock and limited liability securities companies).

• The State Securities Commission shall propose to the Ministry for approval to issue regulations on the corporate governance and risk management system for securities company activities, focusing on market risk and settlement risk.

• The State Securities Commission shall propose to the Ministry for approval to issue in 2012 regulations on evaluating and rating securities business organizations according to international practices, thereby classifying and supervising these organizations.

b) Implementation schedule and reporting regime

No.	Content	Timeframe
1	Report to the Ministry on the Plan and approve the Plan	Q1/2012
2	Implement Phase 1 according to Circular 226/2010/TT-BTC. Focus mainly on handling weak securities companies belonging to Group 3.	2012
3	Report to the Ministry on the results of Phase 1 implementation	Q1/2013
4	Implement Phase 2 according to Circular 226/2010/TT-BTC and evaluate/rate securities companies according to international practices; consolidate and strengthen capacity for companies that have met the established criteria.	Q2/2013-2015

Quarterly, the State Securities Commission shall report to the Ministry of Finance on the status of restructuring securities companies.

Article 2:

The State Securities Commission shall take the lead and coordinate with relevant units to organize the implementation of the Plan. This Decision takes effect from the date of signing. The Chief of Staff and the Chairman of the State Securities Commission are responsible for implementing this Decision.

Where received:

• As per Article 2;
• Prime Minister (for reporting);
• Legal Department;
• Banking Finance Department;
• Store: VT, UBCK.

MINISTER

(Signed)

VUONG DINH HUE