- Concept
Pursuant to Clause 24, Article 6 of the Law on Securities 2019 stipulates:
“Securities depository means the receipt, deposit, preservation and transfer of securities to customers, helping customers exercise rights related to securities ownership”.
In other words, a securities depository is one of the conditions for conducting transactions on the stock market by signing contracts to open accounts at depository members. After being deposited, securities will be recorded into an account in the investor’s name. From here, investors’ accounts will be credited up or down without having to hand over securities papers and certificates.
Rights related to owning securities such as: the right to vote; the right to receive interest and principal capital of bonds; the right to receive bonus shares, stock dividends, cash dividends; the right to purchase additional issued shares; the right to convert convertible bonds… Deposited securities will be recorded in a securities depository account in the investor’s name. When securities are traded, the investor’s account will be credited up or down without having to hand over the securities certificate.
- Securities depository system
The securities depository system consists of the Securities Depository Center and depository members. Where:
- Depository members are securities companies and commercial banks operating in Vietnam that are granted certificates of registration of securities depository activities by the State Securities Commission and approved by the Securities Depository to become depository members (According to Clause 1, Article 47 of the Law on Securities 2019)
- The custody of securities by investors is carried out only at the depository members of the Securities Exchange Center.
To ensure the rights and interests of participating customers, depository members are responsible for opening securities accounts in detail and managing each individual’s assets separately, avoiding uncontrollable confusion.
According to securities depository regulations, a client’s securities assets at a depository member are assets owned by customers and managed separately from members’ assets. Depository members are absolutely not allowed to use securities in customers’ accounts under any circumstances, if detected, they will be sanctioned in accordance with the law.
- Principles of securities depository
– The depository of customers’ securities is managed in two levels: customers depositing securities at depository members and depository members re-depositing customers’ securities at the Securities Depository.
– A depository member receives a depository of customers’ securities as a person authorized by the customer to perform securities registration, depository, clearing and settlement operations. To deposit securities, a client must sign a contract to open a securities depository account with a depository member.
– The Securities Depository receives securities re-depository from depository members as persons authorized by members to perform operations related to securities registration, depository, clearing and settlement activities. To re-deposit securities, a member must open a securities depository account in the name of a depository member at the Securities Depository.
- Procedures for opening securities depository accounts
According to Clause 3 Article 24 of Circular 05/2015/TT-BTC stipulating the opening of securities depository accounts as follows:
“a) At each depository member, investors may only open one (01) securities depository account;
- b) Investors being foreign organizations or individuals open securities depository accounts at depository members after registering securities transaction codes in accordance with relevant laws.”
- Registration of securities depository activities
According to Article 58 of the Law on Securities 2019, regulations on registration dossiers for securities depository activities include:
“1. A dossier of issuance of a Certificate of registration of securities depository activities to a commercial bank or a branch of a foreign bank includes:
- a) An application for registration of securities depository activities;
b/ Establishment and operation licenses;
- c) An explanatory document on material and technical foundations ensuring the performance of securities transaction depository and settlement activities;
- d) Documents evidencing satisfaction of the conditions on the minimum capital adequacy ratio as prescribed by the banking law;
đ) The most recent financial statements have been audited.“
In addition, the dossier of issuance of the Certificate of registration of securities depository activities for securities companies includes:
– An application for registration of securities depository activities;
– An explanatory document on material and technical foundations to ensure the implementation of securities transaction depository and settlement activities.
Above is the content of KALF’s advice on Issues related to securities depository. All of our above advice opinions are based on applicable legal provisions. If you have any questions or requests about legal issues, please contact us for timely answers.
