Decision on Issuing Regulations on Supervision of Registration, Custody, Clearing and Settlement of Securities by Custody Members and Trading and Custody Centers

DECISION

On Issuing Regulations on Supervision of Registration, Custody, Clearing and Settlement of Securities by Custody Members and the Securities Trading Center, Securities Custody Center

CHAIRMAN OF THE STATE SECURITIES COMMISSION

Pursuant to Decree No. 144/2003/ND-CP dated November 28, 2003 of the Government on securities and the securities market;

Pursuant to Decision No. 161/2004/QD-TTg dated September 07, 2004 of the Prime Minister regulating the functions, tasks, powers, and organizational structure of the State Securities Commission;

At the request of the Head of the Securities Business Management Board, Chief Inspector,

DECIDES:

Article 1.

To issue together with this Decision the Regulations on Supervision of Registration, Custody, Clearing and Settlement of Securities by Custody Members and the Securities Trading Center, Securities Custody Center.

Article 2.

This Decision takes effect from the date of signing.

Article 3.

The Chief of Staff, Head of the Securities Business Management Board, Chief Inspector, Directors of the Securities Trading Centers, Securities Custody Center, and Heads of relevant units under the State Securities Commission are responsible for implementing this Decision.

Regulations on Supervision of Registration, Custody, Clearing and Settlement of Securities by Custody Members, Securities Trading Centers, and Securities Custody Centers

(Issued together with Decision No. 401/QD-UBCK dated September 19, 2005 of the Chairman of the State Securities Commission)

I. General Provisions

1. Supervision Objectives

The Regulations on Supervision of Registration, Custody, Clearing and Settlement of Securities by Custody Members, Securities Trading Centers (STC), and Securities Custody Centers (SCC) aim to ensure that the activities of custody members, STCs, and SCCs comply with legal documents on securities and the securities market, protecting the legitimate rights and interests of investors.

2. Basis for Supervision

The supervision of registration, custody, clearing, and settlement of securities by custody members, STCs, and SCCs is based on legal documents on securities and the securities market:

a. Decree 144/2003/ND-CP dated November 28, 2003 of the Government on securities and the securities market;

b. Decision 161/2004/QD-TTg dated September 07, 2004 of the Prime Minister regulating the functions, tasks, powers, and organizational structure of the State Securities Commission;

c. Decision No. 60/2004/QD-BTC dated July 15, 2004 of the Minister of Finance on issuing Regulations on registration, custody, clearing, and settlement of securities;

d. Guidance documents on procedures and regulations related to registration, custody, clearing, and settlement of securities issued by the State Securities Commission (SSC), STCs, and SCCs within their respective competencies.

3. Supervised Entities

The supervised entities specified in this document include custody members and STCs, SCCs operating in accordance with the provisions of Decree 144/2003/ND-CP dated November 28, 2003 of the Government on securities and the securities market and related implementation guidance documents on registration, custody, clearing, and settlement of securities.

II. Specific Regulations

1. Supervision of Custody Members

1.1 Supervision by the Securities Business Management Board

1.1.1 Content of Supervision

The supervision of custody members by the Securities Business Management Board includes the following main contents:

a. Supervision of compliance with legal regulations on the registration, custody, clearing, and settlement of securities activities by custody members.

b. Supervision of compliance with legal regulations on maintaining the conditions for issuing Custody Licenses to custody members; conditions regarding professional staff performing custody operations, members of the Board of Directors responsible for custody activities, and conditions for registration to perform custody activities of commercial bank headquarters and branches.

c. Supervision of compliance with the reporting regime of custody members.

1.1.2 Forms of Supervision

The supervision of custody members by the Securities Business Management Board is carried out through two forms:

a. Remote Supervision: Conducted through reports submitted by custody members.

b. On-site Supervision: Conducted through periodic or ad hoc inspections of the registration, custody, clearing, and settlement of securities activities of custody members. The Securities Business Management Board is responsible for proposing to the SSC Leadership the inspection of custody members and taking the lead in coordinating with relevant units to implement such inspections.

1.2 Supervision by STCs, SCCs

1.2.1 Content of Supervision

STCs, SCCs supervise the activities of custody members in compliance with legal regulations on registration, custody, clearing, and settlement of securities and operational procedures issued by STCs, SCCs.

1.2.2 Forms of Supervision

Supervision by STCs, SCCs is carried out through reports from custody members and through the operational activities of custody members at the Center.

1.3 Responsibility for Coordination in Inspection, Supervision, and Handling Violations among Units within the SSC.

a. STCs, SCCs are responsible for building and submitting to the SSC the content, criteria, and procedures for supervising custody members and their professional staff; building internal control procedures and operational procedures regarding registration, custody, clearing, and settlement of securities activities of the Center; and simultaneously reporting to the SSC on the compliance of custody members with legal regulations on registration, custody, clearing, and settlement of securities. In case of detecting signs of violations by custody members, STCs, SCCs are responsible for preparing specific reports to present to the SSC Leadership.

b. The Securities Business Management Board coordinates with STCs, SCCs in supervising custody members and proposes to the SSC Leadership measures to strengthen law enforcement against custody members to ensure the legitimate rights and interests of investors.

c. The SSC Inspectorate, based on reports from the Securities Business Management Board, STCs, SCCs regarding signs of violations by custody members, or through complaints, denunciations, and other sources, conducts investigations and handles violations within its competency or reports to SSC Leadership to propose handling in cases exceeding its competency.

2. Supervision of STCs, SCCs

2.1 Content of Supervision by the Securities Business Management Board

The supervision of STCs, SCCs activities related to registration, custody, clearing, and settlement of securities by the Securities Business Management Board includes the following contents:

a. Supervision of compliance with legal regulations on securities and the securities market regarding the registration, custody, clearing, and settlement of securities activities of STCs, SCCs.

b. Supervision of compliance with the periodic comprehensive reporting regime on registration, custody, clearing, and settlement of securities activities of STCs, SCCs.

2.2 Forms of Supervision

2.2.1 Remote Supervision:

a. Through reports from STCs, SCCs on the status of registration, custody, clearing, and settlement of securities activities of custody members at STCs, SCCs.

b. Through reports from STCs, SCCs on their own registration, custody, clearing, and settlement of securities activities.

c. Through reports on the settlement of securities transactions by the Designated Settlement Bank.

2.2.2 On-site Supervision: Periodic annual or ad hoc inspections of registration, custody, clearing, and settlement of securities activities at STCs, SCCs.

2.3 Responsibility for Coordination in Supervision and Handling Violations among Units within the SSC.

The Securities Business Management Board coordinates with the SSC Inspectorate in supervising the registration, custody, clearing, and settlement of securities activities of STCs, SCCs. The SSC Inspectorate, based on supervision reports from the Securities Business Management Board detecting signs of violations by STCs, SCCs, or through complaints, denunciations, and other sources, conducts investigations and handles violations within its competency or reports to SSC Leadership to propose handling in cases exceeding its competency.

III. Implementation Organization

1. The Securities Business Management Board, SSC Inspectorate, and Securities Trading Centers are responsible for coordinating to implement these regulations.

2. During implementation, if difficulties or obstacles arise, units shall report to the Chairman of the SSC for consideration and resolution.