Licensing for Establishment and Operation of Securities and Fund Management Companies

The Licensing for Establishment and Operation of Securities and Fund Management Companies is a mandatory document for financial institutions to participate in the capital market. This article details the process and conditions for licensing securities companies and fund management companies according to the latest regulations.

Requirements and conditions for licensing the establishment and operation of securities businesses.

According to Articles 74 and 75 of the Law on Securities 2019, the conditions for licensing include:

1. Capital Conditions

• Charter capital must be contributed in Vietnamese Dong (VND).
• The minimum charter capital is determined by the Government based on specific business operations and types of enterprises.

2. Shareholder/Member Conditions

• Individuals: Must be eligible to establish and manage enterprises under the Law on Enterprises.
• Organizations: Must be legal entities, lawfully operating, profitable for 02 consecutive years prior to the application year, with financial statements audited with an unqualified opinion.
• Foreign Investors: Must meet specific conditions under the Law on Securities.
• Cross-Ownership: A shareholder/member owning 10% or more of one securities business and their related persons cannot own more than 5% of another enterprise of the same type.

3. Structure Conditions

• Must have at least 02 founding shareholders/members that are organizations.
• For Single-Member LLCs: The owner must be an insurer, commercial bank, or foreign organization meeting specific criteria. (For fund management companies, the owner can also be a securities company).
• Ownership Ratio: Organizations must hold at least 65% of charter capital; specifically, commercial banks, insurers, or securities companies must hold at least 30%.

4. Facility and Personnel Conditions

• Facilities: Adequate head office and IT systems suitable for securities business operations.
• Personnel: Must have a General Director (CEO) and at least 01 compliance control staff.
  • CEO: No criminal record, experience in finance/securities, and not sanctioned in the securities sector within the last 06 months.
  • Securities Company Staff: At least 03 certified staff per operation. CEO needs a financial analysis or fund management certificate.
  • Fund Management Company Staff: At least 05 certified fund management staff. CEO needs a fund management certificate.

The competent authority for licensing the establishment and operation of securities businesses.

The State Securities Commission (SSC) is the sole authority competent to grant, re-grant, adjust, and revoke the License for Establishment and Operation of Securities Business. (Legal Basis: Article 70, Law on Securities 2019).

Required documents for applying for a license to establish and operate a securities business.

According to Article 176 of Decree 155/2020/ND-CP, the dossier includes:

1. Request Form: Form No. 64.
2. Establishment Agreement/Decision: Details on name, address, operations, capital, structure, and legal representative.
3. Facility Proof: Lease contract/ownership proof and Description of facilities (Form No. 65).
4. Personnel Documents: List and personal info (Form No. 66, 67) and Judicial records of key personnel (within 06 months).
5. Shareholder Documents: List (Form No. 68), financial statements (audited for 2 years), and establishment decisions for organizations.
6. Internal Processes: Decisions on operational, internal control, and risk management processes.
7. Draft Charter.

Procedures for granting licenses to establish and operate securities businesses.

The procedure follows Article 186 of Decree 155/2020/ND-CP:

Step 1: Submission & Improvement Request Within 20 days of receiving a valid dossier, the SSC issues a written request to complete facilities, block capital, and prepare personnel.

Step 2: Completion (Capital Blocking) Within 03 months from the SSC’s notice, the applicant must:

• Complete facilities.
• Block the remaining charter capital at a payment bank.
• Finalize personnel.
• Note: Failure to complete these within 03 months allows the SSC to refuse licensing.

Step 3: Licensing Within 05 working days of receiving the confirmation of blocked capital and facility inspection minutes, the SSC grants the License.

>>> See more:

• Regulations on securities investment activities of foreign investors
• Procedures for registering a public offering of securities. 

Long Phan Consulting provides consulting services for the establishment and operation of securities businesses.

Long Phan Consulting Company provides comprehensive market entry solutions:

• Consulting: Assessing financial capacity and personnel conditions; building capital structures to avoid cross-ownership violations.
• Drafting: Preparing dossiers, internal control processes, and risk management protocols; handling foreign shareholder documents.
• Representation: Submitting dossiers to the SSC; drafting explanations; advising on post-licensing procedures (information disclosure, depository registration).

Frequently Asked Questions about the issuance of licenses for the establishment and operation of securities businesses and securities investment fund management companies.

Below are some frequently asked questions regarding the licensing and operation of securities companies and investment fund management companies. Please refer to them:

How is minimum capital determined?

It is the total legal capital for registered operations: Brokerage (25 billion VND), Proprietary Trading (50 billion VND), Underwriting (165 billion VND), Investment Advisory (10 billion VND).

(Legal Basis: Article 175, Decree 155/2020/ND-CP).

Can foreign investors contribute capital in foreign currency?

No. Capital contribution must be in Vietnamese Dong (VND). Foreign currency must be converted before contribution.

(Legal Basis: Clause 1 Article 74 & Clause 1 Article 75, Law on Securities 2019).

What is the license duration?

The license has indefinite validity unless revoked or the enterprise is dissolved/bankrupt.

(Legal Basis: Article 95, Law on Securities 2019).

Can a founding shareholder own shares in multiple securities companies?

Restricted. If owning 10% in one securities company, they (and related persons) cannot own >5% in another.

(Legal Basis: Point c, Clause 2, Article 74, Law on Securities 2019).

Conclusion

Obtaining a License for Establishment and Operation of Securities Business requires strict adherence to capital blocking and facility inspection rules. Long Phan Consulting Company is ready to assist clients in navigating these complex regulations. Please contact Hotline 1900636389 for expert advice.