Penalties for securities companies that use their own money and assets to ensure payment obligations of third parties according to legal regulations

1. Can a securities company use its own money and assets to ensure the payment obligations of a third party?

According to Article 27 of Circular 121/2020/TT-BTC stipulations on lending restrictions as follows:

“Article 27. Lending restrictions

1. Except for the cases specified in Clause 1 Article 86 of the Securities Law, securities companies are not allowed to lend money or securities in any form.

2. Securities companies are not allowed to use money or assets of the company or customers to secure payment obligations to third parties.

3. Securities companies are not allowed to lend in any form to Owners, major shareholders, members of the Supervisory Board, or members of the Association. Board of Directors, members of the Board of Directors, members of the Board of Directors, chief accountant, other management positions appointed by the Board of Directors of the securities company and related persons of the above subjects.

4. Securities companies that have been allowed to conduct margin trading according to the law are allowed to lend money to customers to buy securities in the form of margin trading according to the instructions of the Ministry of Finance. main.

5. Securities companies are allowed to lend securities to correct transaction errors, or lend to carry out fund certificate exchange transactions or other forms in accordance with relevant laws.”

Accordingly, currently, securities companies are not allowed to use their assets to secure payment obligations to third parties. three.

2. If a securities company uses its own money and assets to ensure the payment obligations of a third party, how will it be punished?

According to Clause 5, Article 26 of Decree 156/2020/ND-CP regulating the handling of violations of regulations on the operations of securities companies and branches of foreign securities companies in Vietnam, specifically can:

“Article 26. Violations of regulations on operations of securities companies and branches of foreign securities companies in Vietnam

[…]

5. Fine from 150,000,000 VND to 200,000,000 VND for one of the following violations:

a) Not implementing separate management of each customer’s assets, separating customer assets from assets of securities companies, branches of foreign securities companies in Vietnam;

b) Directly receiving and paying customers’ securities transactions; Receive authorization from customers to make internal money transfers between customer accounts;

c) Violating regulations on customer securities management;

d) Violating regulations on loan restrictions or lending restrictions;

d) Violating regulations on contributing capital to establish, purchasing shares, and capital contributions of other securities companies in Vietnam Nam.

Accordingly, a fine from 150,000,000 VND to 200,000,000 VND for violating loan restrictions.

3. Are the fines for individuals and organizations the same?

According to Clause 4, Article 1 of Decree 128/2021/ND-CP stipulating the principles of sanctioning administrative violations of securities and the stock market as follows:

– Organizations and individuals are only sanctioned for administrative violations of securities and the stock market when they commit administrative violations of securities and securities markets. securities and stock markets specified in this Decree.

– Organizations and individuals that commit many administrative violations or multiple administrative violations will be sanctioned for each violation, except in cases where organizations and individuals commit multiple administrative violations and these violations are discovered at the same time but have not yet been sanctioned and the statute of limitations for sanctions has not expired, then the administrative violation shall be sanctioned once for the violation, and at the same time apply the aggravation of repeated administrative violations. For the following cases of repeated administrative violations, the penalty for the act with the highest fine range among the acts committed and aggravating circumstances for repeated administrative violations is applied:

+ Organizations and individuals that do not report on time or do not report when there is a change in the percentage of shares or fund certificates owned over the threshold of 1% of the number of voting shares or fund certificates of a closed fund or when owning 5% or more of the voting shares of a public company, public securities investment company or fund certificates of a closed fund or when no longer a major shareholder or no longer an investor owning 5% or more. or more fund certificates of closed-end funds specified in Clauses 1 and 6, Article 33 of this Decree;

+ Organizations and individuals that commit acts of not reporting on transaction results on time or failing to report on transaction results as prescribed in Clauses 2 and 3, Article 33 of this Decree;

+ Organizations and individuals that commit acts of not reporting on expected transactions or carrying out transactions outside the registration period or outside the period of information disclosure by the Vietnam Stock Exchange or its subsidiaries or exceeding the registered value specified in Clauses 4 and 5, Article 33 of this Decree;

+ Organizations and individuals that disclose information on time or do not disclose information that must be disclosed as prescribed in Point a, Clause 3 and Point a, Clause 4, Article 42 of this Decree, or that report on time or do not report information that must be reported as prescribed in Point a, Clause 2 and Clause 3, Article 43 of this Decree.

– Principles for applying fines:

+ The maximum fine for violations specified in Clause 1, Article 35 and Clause 1, Article 36 of this Decree is 10 times the illegal revenue for organizations and 05 times the illegal revenue for individuals. In case there is no illegal revenue or the fine calculated based on the illegal revenue is lower than the maximum fine specified in Point b of this Clause, the maximum fine specified in Point b of this Clause shall be applied to sanction;

+ The maximum fine in administrative sanctions for other violations in the securities sector is 3,000,000,000 VND for organizations and 1,500,000,000 VND for individuals;

+ The fine levels specified in Chapter II of this Decree are applicable to organizations, except for the cases specified in Clauses 3, 4 and 5, Article 15, Clause 2, Article 30 of this Decree stipulates the fine levels applicable to individuals, in the cases specified in Clauses 3 and 5, Article 39. This Decree stipulates both the fine levels applicable to organizations and individuals. In case an individual commits a violation like that of an organization, the fine is equal to 1/2 the fine for an organization.

Thus, a fine from 150,000,000 VND to 200,000,000 VND for a violation of lending restrictions is for an organization, for an individual it is ½ that of an organization.