Stock market: Untangling the Prefunding bottleneck, attracting foreign investors

DNVN - The State Securities Commission has officially published the Draft Circular amending and supplementing a number of articles of the Circulars regulating securities transactions. The Draft has many new provisions to facilitate foreign institutional investors to buy securities without having to have 100% of the money in their accounts (Pre-funding).

The Draft Circular amending and supplementing a number of articles of the Circulars regulating securities transactions (Draft) has many new provisions to facilitate foreign institutional investors to purchase securities without having to have 100% of the money in their accounts (Pre-funding). At the same time, it creates conditions for foreign investors to have equal access to information about the securities market.

Accordingly, the securities company shall assess the payment risk of the foreign institutional investor to determine the amount of money required when placing an order to buy shares (if any) according to the agreement between the securities company and the foreign institutional investor.

In case a foreign investor being an organization fails to make full payment for the stock purchase transaction, the obligation to pay the remaining amount shall be transferred to the securities company where the foreign investor being an organization places the order through the self-trading account, except for some cases specified in the Draft.

The draft is assessed as suitable and highly feasible, attracting foreign investors in the stock market.

A securities company may sell by agreement on the securities trading system or transfer ownership outside the securities trading system for the number of shares transferred to its proprietary trading account to a foreign investor. No later than the trading day following the day the shares are accounted for in the securities company's proprietary trading account, in case this transaction does not exceed the maximum limit on the ownership ratio of foreign investors as prescribed by law for that share.

Except for the above transactions, securities companies sell shares on the securities trading system. Financial amounts arising from transactions are made according to the agreement between the securities company and the foreign institutional investor or the authorized representative of the foreign institutional investor.

In case the foreign investor is an organization that places an order to buy shares but fails to make full payment as prescribed, the Vietnam Securities Depository and Clearing Corporation shall transfer the payment obligation for the remaining share purchase transaction of the foreign investor. The securities company must ensure sufficient funds to pay for the transaction.

In addition, the Draft also stipulates that the time when foreign organizations need to have enough money in their transfer accounts is from about 2:30 p.m. on T+1 (after 1 day of transaction) to 9:30 a.m. on T+2. The time from when foreign organizations must fulfill their payment obligations to when securities arrive is only a few hours, from 9:30 a.m. to 1:00 p.m. on T+2.

Regarding equal information, the Draft Circular also stipulates: the language of information published on the stock market is Vietnamese. Listed organizations, public companies, stock exchanges, and the Vietnam Securities Depository and Clearing Corporation shall simultaneously publish information in English.

Information published in English must be consistent with the content of information published in Vietnamese. In case of any discrepancy or misunderstanding between the information in Vietnamese and English, the information in Vietnamese shall be the original information for reference.

According to the assessment of domestic and foreign experts, the new solutions and regulations in the Draft are appropriate and highly feasible. The State Securities Commission expects that the issuance of the Circular will have a positive impact on the process of considering upgrading the Vietnamese stock market.

Ha Anh

Source: https://doanhnghiepvn.vn/kinh-te/chung-khoan/thi-truong-chung-khoan-go-nut-that-prefunding-thu-hut-nha-dau-tu-nuoc-ngoai/20240721082611363