CIRCULAR

REGARDING METHODS FOR CALCULATION OF ILLEGAL GAINS OR PROCEEDS FROM COMMISSION OF OFFENCES AGAINST LAWS ON SECURITIES AND STOCK MARKETS

Pursuant to the Law on Securities dated November 26, 2019;

Pursuant to the Law on Actions against administrative violations dated June 20, 2012;

Pursuant to the Government’s Decree No. 81/2013/ND-CP dated July 19, 2013, detailing a number of articles and measures for implementation of the Law on Sanctions for Administrative Violations and the Government’s Decree No. 97/2017/ND-CP dated August 18, 2017, amending and supplementing a number of articles of the Government's Decree No. 81/2013/ND-CP dated July 19, 2013, detailing a number of articles and measures for implementation of the Law on Sanctions for Administrative Violations;

Pursuant to the Government’s Decree No. 156/ND-CP dated December 31, 2020, regulating administrative penalties for offences arising from securities and stock markets;  

Pursuant to the Government's Decree No. 87/2017/ND-CP dated July 26, 2017, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

Upon the request of the President of the State Securities Commission;

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Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Circular prescribes methods for calculation of illegal gains or proceeds from commission of offences against laws on securities and stock markets.

Article 2. Regulated entities

1. Persons and entities committing offences prescribed in the Government’s Decree No. 156/2020/ND-CP dated December 31, 2020, regulating administrative penalties for offences arising from securities and stock markets (hereinafter referred to as Decree No. 156/2020/ND-CP). 

2. Persons having competence in imposing sanctions for administrative offences arising from securities and stock markets as prescribed in Article 47 in the Decree No. 156/2020/ND-CP. 

3. Persons authorized to administrative offence notices as regulated in Article 48 of the Decree No. 156/2020/ND-CP.

4. Other persons and entities involved in the sanctions for administrative offences arising from securities and stock markets.

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METHODS FOR CALCULATION OF ILLEGAL GAINS OR PROCEEDS FROM COMMISSION OF OFFENCES AGAINST LAWS ON SECURITIES AND STOCK MARKETS

Article 3. Principles and methods for calculation of illegal proceeds from the act of manipulating stock markets, using internal information for purchase and sale of stocks

1. Illegal proceeds as prescribed in Article 132 of the Law on Securities is the amount of profits that an entity or person is brought from performing acts of manipulating the securities market, using internal information for purchase and sale of stocks, after taking away taxes and fees payable. Taxes and fees payable must be declared and attested by securities companies.

2. Calculation principles:

a) Illegal proceeds are determined from the time of commencement of commission of offences to the time of cessation of offences;

b) The period for stock market manipulation is the time length during which the violator commits the act of manipulating the stock market which is recorded in the notice of administrative offence. The period for use of internal information for purchase and sale of securities is the period during which the violator performs the act of using internal information for buying and selling securities which is recorded in the notice of administrative offence. The number of trading accounts involved in the act of manipulation of stock markets or use of internal information for purchase and sale of stocks is defined in the notice of administrative offence;

c) In case an entity or individual commits multiple offences, illegal proceeds specific to offences shall be determined.

d) In case an entity or individual commits offences in multiple times, illegal proceeds specific to times of commission of these offences shall be determined;

dd) In case an entity or individual commits offences involving multiple stock accounts, illegal proceeds specific to stock accounts shall be determined;

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g) In case where a group of entities or a group of persons, or a mixed group of entities and persons commits the act of manipulation of the stock market or use of internal information for purchase and sale of stocks, illegal proceeds shall be calculated based on total number of trades via accounts used to commit offences after excluding intra-group transactions between accounts (if any);

If there is no grounds for determining illegal proceeds of specific violating entities or persons, these illegal proceeds shall be divided equally among these violating entities or persons;

h) Based on notices of administrative offences arising from the act of manipulating the stock market or the act of using internal information for purchase and sale of stocks, the chief inspector of the inspection team shall be responsible for calculating and making a report on the calculation of illegal proceeds, and submitting it to the President of the State Securities Commission to seek his/her decision.

In case where there are illegal proceeds from the act of manipulating the stock market or using inside information to buy and sell securities, the President of the State Securities Commission shall set up a Council for calculation of illegal proceeds. The composition of the Council for calculation of illegal proceeds shall be decided by the President of the State Securities Commission. The President of the State Securities Commission may consult opinions from stock experts of the Ministry of Finance, socio-professional organizations, public security agencies and other relevant agencies, organizations and individuals.

3. Illegal proceeds obtained from committing the act of manipulating the stock market is calculated according to the following formula:

Illegal proceeds = (Average selling price - Average purchase price) x (Selling volume - intra-group trading volume) - Taxes, fees payable.

a) Average selling price = (Selling value of stocks – Value of intra-group traded stocks) / (Selling volume of stocks – intra-group trading volume of stocks):

b) If total selling volume of stocks is less than or equal to total buying volume within the manipulation period, the average purchase price shall be calculated as follows:

Average buying price = (Buying value - intra-group trading value) / (Buying volume – intra-group trading volume):

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Average buying price = (Selling value + arbitrage value - intra-group trading value) / (Buying volume + arbitrage – intra-group trading volume). Where

Arbitrage volume = selling volume – buying volume.

Arbitrage value = Arbitrage volume x price of arbitrage volume.

Price of arbitrage volume is the reference price determined on the day starting the manipulation period:

d) Illegal proceeds from performing the act of manipulating the stock market in the event that, in the period of manipulation of the stock market, there is any adjustment in the stock price which is calculated as total illegal proceeds during the period preceding the time of price adjustment (the ex-rights date), and illegal proceeds in the period after the price adjustment.

Illegal proceeds made in the period before the time of price adjustment and the illegal proceeds in the period after the price adjustment are calculated according to the formula specified in this Clause. For the cases where total volume of stocks sold is greater than total volume of stocks purchased in the period after price adjustment, the price of the arbitrage volume specified in point c of this clause is the reference price determined on the ex-rights date.

4. Illegal proceeds obtained from committing the act of manipulating the stock market. If such manipulation results in a drop in share price, and then shares are purchased, illegal proceeds shall be calculated as follows:

Illegal proceeds = (Average selling price - Average purchase price) x (Buying volume - intra-group trading volume) - Taxes, fees payable. In this formula, the average selling price is determined according to the provisions of Point a, Clause 3 of this Article and the average buying price is determined according to the provisions of Point b, Clause 3 of this Article.

In case where, in the period of manipulation of the stock market, there is any adjustment in the stock price, illegal proceeds shall be calculated as total illegal proceeds arising during the period preceding the time of price adjustment (the ex-rights date), and illegal proceeds arising in the period after the period of price adjustment. Illegal proceeds made over periods of time shall be calculated according to the formula prescribed in this clause.

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a) In case where the public disclosure of internal information causes the stock price to increase, the illegal proceeds are calculated on the basis of the spread between the average selling price and the average buying price multiplied by total volume of securities sold within 30 days from the date on which internal information is publicly disclosed after taking away all taxes and fees payable. The period for calculation of the average buying price is determined from the time the violator uses internal information to buy stocks to the time internal information is disclosed;

b) In case where the public disclosure of internal information causes the stock price to decrease, the illegal proceeds are calculated on the basis of the spread between the average selling price and the average closing price within 10 consecutive days from the date on which internal information is publicly disclosed, multiplied by total selling volume after taking away all taxes and fees payable. The period for calculation of the average buying price is determined from the time the violator uses internal information to buy stocks to the time internal information is disclosed.

The time internal information is disclosed is the time the information appears on one of the communications media as prescribed in the Circular of the Minister of Finance, providing instructions about the public disclosure of information on the stock market.

Article 4. Principles and methods for calculation of illegal gains from commission of offences against laws on securities and stock markets

1. The amount of illegal gains obtained from commission of offences against laws on securities and securities market according to the provisions of Point d, Clause 3, Article 4 of Decree No. 156/2020/ND-CP is the profits including money, security instrument, assets and valuables obtained by commission of violations by entities and persons against laws on securities and securities market after taking away taxes and fees payable.

2. Principles of calculation of illegal gains:

a) In case where an entity or individual commits multiple offences, illegal gains specific to offences shall be determined;

b) In case where an entity or individual commits an offence in multiple times, the illegal gain specific to the time of commission of an offence shall be determined;

c) In case an entity or individual commits an offence involving multiple stock ticker symbols, the illegal gain specific to a stock ticker symbol shall be determined.

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a) The amount of illegal gains obtained from selling the repurchased shares specified at Point d, Clause 2, Article 16 of Decree No. 156/2020/ND-CP is calculated according to the following formula:

Illegal gain = Selling volume x (Average selling price – Average buying price) – Taxes and fees payable.

Where

Average selling price = Total selling value / Total selling volume.

Average buying price = Total buying value / Total volume of repurchased stocks.

b) Illegal gains obtained from performing the act of taking advantage of knowing information about public offers to buy and sell securities for the violator’s benefit, or the act of providing information, instigating or enticing others to buy or sell securities ahead of the time of the official public bid specified in Clause 4, Article 17 of Decree No. 156/2020/ND-CP, are calculated according to the method of calculating illegal proceeds obtained from performing the act of using internal information to perform stock trades as specified in Clause 5, Article 3 of this Circular;

c) Illegal gains obtained from the act of organizing a securities trading market in contravention of the provisions of Clause 2, Article 42 of the Law on Securities, and the provisions of Clause 1, Article 20 of Decree No. 156/2020/ND-CP are total amount of gains that an organization or individual obtains from choosing a place or form of information exchange to gather stock buy, sell and trade orders;

d) Illegal gains obtained from the act of leasing or transferring permits specified at Point b, Clause 4, Article 24 of Decree No. 156/2020/ND-CP, and illegal gains obtained from leasing securities practicing certificates specified at Point a, Clause 4, Article 32 of Decree No. 156/2020/ND-CP, are the profits that an organization or individual has from the lease or transfer of permits, the lease of securities practicing certificates, which are determined on the basis of contracts or agreements between the lessor or transferor and the lessee or transferee;

dd) Illegal gains obtained from the act of lending accounts to other people for securities trading, or owning securities on behalf of others, leading to the act of manipulating the securities market as prescribed in Clause 1, Article 34 in the Decree No. 156/2020/ND-CP is the profits that an account-lending organization or individual gets from lending an account for securities trading or trusted ownership of securities on behalf of another person, and is determined on the basis of a contract or agreement between the account borrower and the account lender, between the trustor and trustee;

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g) The amount of illegal gains obtained from commission of offences involving transfer of stocks which are individually offered as prescribed in Clause 3, Article 34 in the Decree No. 156/2020/ND-CP is calculated according to the following formula:

Illegal gain = Transferred volume x (Average selling price – Average buying price) – Taxes and fees payable.

Where

Average selling price = Total selling value of transferred volume / Total transferred volume.

Average buying price = Total buying value / Total volume of purchased stocks.

h) Illegal gains obtained by performing one or more transactions for the purpose of concealing information about the actual ownership of a stock in order to evade or assist others in evading obligations to publicly disclose information in accordance with regulations or obligations to comply when conducting the public bid, or regulations on obligations to comply with the allowable rate of foreign ownership in Vietnam's stock market as provided in Clause 4, Article 34 of Decree No. 156 2020/ND-CP, shall be calculated as follows:

- For organizations or individuals that perform one or several transactions to conceal information about their actual ownership of a stock with the intention of evading the obligations to disclose information according to regulations, or the obligation to comply when making the public bid or regulations on compliance with the rate of foreign ownership in Vietnam's stock market, the amount of illegal gains that the violating organization or individual obtains from commission of offences is total amount of money, securities and other interest arising from stocks of which actual ownership is concealed;

- For organizations or individuals that perform one or several transactions with the intention of helping others conceal information about the actual ownership of a stock in order to evade the public disclosure obligations in accordance with regulations, or the obligations to comply when conducting the public bid, or regulations on obligations to comply with the allowable rate of foreign ownership in Vietnam's stock market, the illegal gain that the violating organization or individual has due to commission of offences shall be calculated on the basis of the contract or agreement between parties.

i) Illegal gains obtained from commission of the act of using assets of securities investment funds, investment companies or trusted investors in contravention of regulations laid down in clause 4 of Article 40 in the Decree No. 156/2020/ND-CP are all of the profits that depository banks earn from use of these assets in breach of laws.

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IMPLEMENTATION PROVISIONS

Article 5. Entry into force

1. This Circular shall take effect as of February 15, 2021.

2. This Circular shall replace the Circular No. 217/2013/TT-BTC dated December 31, 2013 of the Minister of Finance, providing instructions on sanctions for administrative violations arising in securities and securities market activities and the Circular No. 36/2017/TT-BTC dated April 27, 2017 of the Minister of Finance, amending and supplementing several articles of the Circular No. 217/2013/TT-BTC dated December 31, 2013 of the Minister of Finance, providing instructions on sanctions for administrative violations arising in securities and securities market activities.

3. If documents presented as references herein are amended or supplemented or replaced, the new versions thereof shall prevail.

4. In the course of implementation of this Circular, if there is any difficulty that arises, agencies, organizations and units should promptly report to the Ministry of Finance to seek their actions./.

PP. MINISTER
DEPUTY MINISTER




Huynh Quang Hai

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