The vibrant economy of Vietnam has increasingly captured the attention of global investors, with its stock market emerging as a dynamic arena for capital growth. 

However, for any entity looking to delve into the "stock trading business" within this burgeoning market, it's crucial to understand that this is not an open invitation but a meticulously regulated "conditional business sector." 

This comprehensive guide, informed by the expertise of firms like Viettonkin Consulting, will walk you through the intricacies of establishing and operating a stock trading business in Vietnam, covering essential informational, transactional, and commercial aspects to ensure a clear path to compliance and success.

I. Introduction: The Conditional Landscape of Securities Business in Vietnam

The securities business in Vietnam is inextricably linked to the nation's financial market, capital flows, and investment landscape. 

Given its profound impact on national financial security, the protection of investor interests, and the overall transparency and stability of the securities market, this sector is stringently overseen by the State Securities Commission of Vietnam (SSC) and the Ministry of Finance. 

Consequently, it is categorized as a "conditional business," meaning any enterprise aspiring to operate in this field must satisfy a comprehensive set of requirements. These range from fundamental registration protocols and capital adequacy to intricate shareholder structures, qualified personnel, robust physical infrastructure, and adherence to specific legal procedures. 

Understanding these nuances is where the guidance of experienced consultants, such as Viettonkin Consulting, becomes invaluable.

The official designation for this activity, as per Appendix IV of the 2020 Investment Law, is "Securities Business". This encompasses various entities such as Securities Trading Companies, Securities Fund Management Companies, and branches of foreign securities trading or fund management companies in Vietnam. 

The corresponding Industry/Activity Code is 6710, specifically for "Securities Activities," which must be explicitly stated in registration documents.

II. The Legal Pillars: Foundations of Securities Business

Operating within Vietnam's securities sector necessitates a deep understanding of its foundational legal framework. Key legislative documents that govern this business activity include:

• Investment Law 2020: The overarching law guiding investment activities in Vietnam.
• Securities Law 2019: The primary legislation specifically addressing securities and the securities market.
• Decree No. 155/2020/ND-CP: Issued on December 31, 2020, this decree provides detailed guidance on securities business activities and the management of public companies.
• Decree No. 158/2020/ND-CP: Also dated December 31, 2020, this decree outlines administrative fines for violations in the field of securities and the securities market.
• Decree No. 55/2015/ND-CP: Dated June 9, 2015, this decree prescribes the management, provision, and use of information in the securities market (if applicable).
• Guiding circulars: Any relevant circulars issued by the Ministry of Finance or the State Securities Commission of Vietnam.
• Decisions of competent authorities: Any decisions related to business processes, internal control, or risk management.
• Specialized laws: Such as the Enterprise Law 2020 for corporate establishment and the Law on Information Security 2015 for IT systems, if relevant.

Adhering to these legal bases is not merely a formality but a critical component of risk management and ensuring the longevity of your operations. 

Expert firms like Viettonkin Consulting frequently assist businesses in deciphering these complex regulations and ensuring full compliance.

III. Conditions for Business: Meeting the Entry Requirements

To successfully establish a stock trading business in Vietnam, prospective entities must satisfy a stringent set of conditions categorized as follows:

1. Legal/Enterprise Requirements

• Form of Enterprise: A securities trading company or fund management company must be established under the Enterprise Law, either as a limited liability company or a joint-stock company.
• Foreign Branches: Branches of foreign securities trading companies or foreign fund management companies in Vietnam must register for business at the Business Registration Office.
• Location: Head office and branch locations must fall within the scope of the license and meet securities business registration requirements.

2. Capital Requirements

Charter capital must be contributed in Vietnamese đồng and meet specific minimum levels:

• Securities Trading Company: Minimum charter capital of VND 120 billion (or as prescribed by current regulations).
• Fund Management Company: Minimum charter capital of VND 20 billion (or as prescribed by current regulations).
• Foreign Branches: Minimum branch capital as required by the Securities Law.

Raising the full charter capital can be a significant hurdle for newly established entities, necessitating meticulous financial planning and capital commitment strategies. 

Viettonkin Consulting can provide valuable advice on capital structuring and investment strategies.

3. Personnel Requirements

The quality and qualifications of personnel are paramount in this sector:

• Chief Executive Officer (CEO/General Director):
  • Must not be under criminal prosecution, serving a prison sentence, or banned from practicing in the securities field.
  • Requires at least 2 years of experience in a professional department of a financial, securities, banking, or insurance organization, or in the finance, accounting, or investment department of another enterprise.
  • Must hold a professional certificate in financial analysis or fund management (securities trading companies require an appropriate securities practice certificate for their activities).
  • Must not have been administratively sanctioned in the securities field within the last 6 months as of the application date.
• Other Key Personnel:
  • Securities Trading Company: A minimum of 3 employees holding appropriate securities practice certificates for each licensed business line, and at least 1 compliance officer.
  • Fund Management Company: A minimum of 5 employees holding fund management practice certificates, and at least 1 compliance officer.
  • Deputy CEO/Director: If responsible for specific business activities, they must meet the required professional certificate standard (securities practice or fund management) and have no administrative sanctions in the last 6 months.

A common challenge is the lack of personnel holding the necessary securities practice or fund management certificates, underscoring the importance of early recruitment and certification. 

Viettonkin Consulting can assist in identifying key personnel requirements and advising on recruitment strategies.

4. Physical Infrastructure

Robust infrastructure is essential for secure and efficient operations:

• Head Office: Must have a head office that supports securities business operations, including working offices and trading rooms (if applicable), and a secure IT network.
• Equipment and Systems: Sufficient equipment, technical facilities, office equipment, servers, and IT systems appropriate for securities business processes (trading systems, data storage, backups, cybersecurity, and network protection) are mandatory.
• Monitoring and Security: A 24/7 monitoring and incident reporting system, and a server room meeting information security standards, must be maintained.

Significant investment in IT systems is often required to meet these stringent information security standards.

5. Licenses/Permits

The acquisition of specific licenses and permits is non-negotiable:

• Securities Trading/Fund Management Company: Must be granted a License for Establishment and Operation of Securities Business by the State Securities Commission of Vietnam (SSC).
• Foreign Branches: Must be granted a License to establish a Branch in Vietnam by the SSC.
• Representative Offices: Representative offices of foreign securities trading companies and foreign fund management companies must receive a Certificate of Registration for operation of a Representative Office.

IV. The Licensing Procedure: Your Path to Operation

Obtaining the necessary license is a multi-step process, primarily overseen by the State Securities Commission of Vietnam (SSC). 

Viettonkin Consulting specializes in guiding businesses through this intricate process, ensuring all documentation is accurate and submitted efficiently.

1. Application Submission

• Authority: Applications are submitted to the State Securities Commission of Vietnam (SSC).

2. Required Dossier (for a securities trading company)

A comprehensive dossier is required, including:

1. Application requesting a License for Establishment and Operation of Securities Business.
2. Minutes of the shareholders' decision to establish the company or the owner's decision, detailing company name, head office address, business activities, charter capital, ownership structure, approval of the draft Charter, and legal representative.
3. Office lease contract or documents proving ownership/use rights of the head office; description of physical infrastructure according to Form 65 in the Decree's appendix.
4. List of key personnel with personal data forms (Form 66, Form 67), accompanied by criminal record certificates for Board members, Chairman of Members' Council, Chairman of the Board, and CEO (issued within 6 months).
5. List of shareholders/contributing members (Form 68), accompanied by:
   • Individuals: Personal data form (Form 67), criminal record certificate for any founding shareholder or person contributing ≥ 5% of charter capital (issued within 6 months).
   • Organizations: Business Registration Certificate or equivalent, company's Charter, board resolution on capital contribution, personal data form of the authorized representative (Form 67), audited financial statements of the two preceding fiscal years (consolidated if a parent company), and approval documents from the State Bank of Vietnam (if a commercial bank) or Ministry of Finance (if an insurance enterprise), if applicable.
   • Written commitment from organizations or individuals to meet the requirements of Clause 2(c), Article 74 and Clause 2(c), Article 75 of the Securities Law.
6. Decision of the competent authority issuing business processes, internal control processes, and risk management processes.
7. Draft Company Charter.

The dossier for a fund management company is similar but must adhere to specific forms and meet distinct capital, shareholder, and personnel requirements.

3. Processing Time and Fees

• Processing Time: As prescribed by SSC regulations, typically not exceeding 30 days from the date of receipt of a complete, valid dossier. However, actual timeframes may vary.
• Fees: Currently, there is no separate licensing fee, but any administrative fees will be notified by the Ministry of Finance.

Preparing documents such as criminal record certificates and audited financial statements, especially for foreign shareholders, can be time-consuming, so proactive planning is essential to avoid delays. 

Viettonkin Consulting can streamline this process by assisting with document preparation and submission.

V. Competent Authorities and Compliance: Navigating the Regulatory Landscape

The regulatory oversight of the stock trading business in Vietnam is comprehensive, involving several key authorities:

• Issuing Authority: The State Securities Commission of Vietnam (SSC), operating under the Ministry of Finance.
• Inspection/Enforcement Authorities:
  • State Securities Commission of Vietnam (SSC)
  • Ministry of Finance
  • State Bank of Vietnam (for lending and banking-related activities)
  • Insurance Regulators (for fund management companies linked to insurance enterprises)
  • Independent inspectors/auditors (conducting periodic or unannounced audits)

Maintaining rigorous internal controls, risk management processes, and ensuring transparent information disclosure are not just regulatory requirements but cornerstones of sustainable business operations. 

Viettonkin Consulting can provide ongoing compliance support and help establish robust internal governance frameworks.

VI. Sanctions for Non-Compliance: The Consequences of Deviation

Failure to adhere to the stipulated conditions and regulations can lead to severe penalties. Violations include:

• Engaging in securities activities without a valid license or beyond the scope of the licensed business.
• Failing to meet declared conditions regarding capital, shareholder structure, personnel, or physical infrastructure.
• Failing to comply with business processes, internal controls, risk management, or violating regulations on trading and information disclosure.

The consequences for such non-compliance can be substantial:

• Administrative Fines: Under Decree No. 158/2020/ND-CP, fines can reach several hundred million VND, depending on the nature and severity of the violation.
• Additional Measures: These may include the revocation of the License for Establishment and Operation of Securities Business, suspension of business operations, removal of authorization to perform certain activities, mandatory remediation of consequences, compensation for investor damages, and ultimately, license revocation and termination of operations.

Understanding these potential sanctions underscores the critical importance of meticulous adherence to all regulatory frameworks. 

Viettonkin Consulting advises clients on potential risks and helps develop strategies to mitigate them, ensuring full compliance.

VII. Practical Notes and Common Situations: Insights for Success

Navigating the Vietnamese stock trading business often presents specific challenges and common pitfalls that prospective entrants should be aware of:

• Business Registration Clarity: It is crucial to explicitly state "Securities Business" exactly as it appears in Appendix IV of the Investment Law to prevent application rejection.
• Capital Mobilization: Many new entities face difficulties in initially raising the full charter capital. Proactive planning for funding and capital commitment is vital.
• Shareholder Structure: Ensure that Vietnamese institutions hold at least 65% of the charter capital. If forming a securities trading company, banks or insurance enterprises must hold at least 30%. Careful balancing of contributions is necessary to avoid violating cross-ownership regulations.
• Personnel Certification: A frequent reason for dossier rejection is the lack of personnel holding the required securities practice or fund management certificates. Early recruitment and prompt certification are highly recommended.
• IT Systems Investment: Trading, data storage, and security systems must strictly comply with information security standards. Enterprises often need to invest significantly in IT infrastructure to meet these requirements.
• Documentation Preparation: Gathering criminal record certificates, audited financial statements, and documents from foreign shareholders can be time-consuming. Plan ahead to mitigate potential delays.
• Cross-Ownership Regulations: Be vigilant to avoid scenarios where a shareholder or related person directly or indirectly holds more than 5% of the charter capital in two different securities or fund management companies, as this constitutes a violation of cross-ownership rules.

These practical insights are often garnered from extensive experience, and firms like Viettonkin Consulting leverage such knowledge to provide comprehensive support to their clients.

VIII. Requirements for Foreign Investors: Opportunities and Restrictions

Vietnam's opening securities market presents promising opportunities for foreign investors, but with specific conditions and commitments:

• Foreign Ownership Limit: Foreign investors may own up to 49% of the charter capital in a securities trading company or fund management company, unless the Government grants a higher limit. They are not restricted from formation if they meet the requirements of Clause 2, Article 77 of the Securities Law (i.e., do not participate in capital contribution in any securities/fund management company in Vietnam in which they hold over 49%).
• Commitments: Foreign investors must comply with WTO commitments on distribution services and electronic commerce related to securities. They must also be licensed by their home country's regulator to manage public funds and have bilateral or multilateral cooperation agreements on information exchange, joint supervision, and inspection with the SSC.
• Establishing a Legal Entity: Foreign investors typically establish a branch or a joint venture with a Vietnamese enterprise, adhering to branch capital, infrastructure, and personnel requirements as prescribed by the Securities Law. Foreign institutional shareholders must submit audited financial statements and must not hold more than 5% of charter capital in any other securities or fund management company in Vietnam (Clause 2(c), Article 77).

Viettonkin Consulting has a proven track record of assisting foreign investors in navigating these specific requirements, ensuring a smooth entry into the Vietnamese market.

IX. Conclusion: A Strategic Approach to the Vietnamese Securities Market

The stock trading business in Vietnam, while offering significant growth potential, is a highly conditional activity demanding meticulous preparation and unwavering adherence to regulatory frameworks. 

From the initial stages of establishment, including shareholder structure, capital allocation, and personnel recruitment, to the implementation of robust physical infrastructure and IT systems, and strict compliance with business processes and risk management protocols, every aspect requires thorough attention.

Meeting all the stipulated conditions and diligently preparing a complete dossier are crucial steps that can significantly expedite the licensing process, foster stable operations, and minimize legal risks. 

For foreign investors, Vietnam's continuous opening of its securities market presents a compelling opportunity. However, success hinges on strict adherence to ownership restrictions and international commitments. 

By understanding and meticulously navigating these requirements, both domestic and international entities can unlock the vast potential within Vietnam's dynamic stock trading sector. 

For expert guidance and comprehensive support throughout this complex journey, consider partnering with an experienced firm like Viettonkin Consulting, dedicated to facilitating your success in the Vietnamese market.

Discover proven strategies to succeed in Vietnam’s stock market. Read the full article here: Stock Market in Vietnam: Strategies for Success.