THE MINISTRY OF FINANCE
THE STATE SECURITIES COMMISSION
Decision No. 105/QD-UBCK dated February 26, 2013 of the State Securities Commission on promulgating the regulation guiding the setting up and operation of the risk management system for securities companies
Pursuant to the Law on Securities, of June 29, 2006;
Pursuant to the Law amending and supplementing a number of articles of Law on Securities, of November 24, 2010;
Pursuant to the Decree No. 58/2012/ND-CP dated July 20, 2012 of the Government stipulating in detail and guiding the implementation of a number of articles of the securities Law and the law amending and supplementing a number of articles of securities Law
Pursuant to the Decision No. 112/2009/QD-TTg dated September 11, 2009, of the Prime Minister defining the functions, tasks, powers and organizational structure of the State Securities Commission of the Ministry of Finance;
Pursuant to the Circular No. 210/2012/TT-BTC dated November 30, 2012 of the Ministry of Finance guiding the establishment and operation of securities companies;
At the proposal of Director of Securities Business Management Department,
DECIDES:
Article 1. To promulgate together with this Decision the Regulation on guiding the setting up and operation of the risk management system for securities companies.
Article 2. This Decision takes effect on the day of its signing.
Article 3. The Chief of office, Director of Securities Business Management Department, securities companies and relevant parties shall implement this Decision.
The Chairperson of the State Securities Commission
Vu Bang
REGULATION
GUIDING THE SETTING UP AND OPERATION OF THE RISK MANAGEMENT SYSTEM FOR SECURITIES COMPANIES
(Issued with the Decision No. 105/QD-UBCK dated February 26, 2013 of the Chairperson of State Securities Commission)
Chapter 1.
GENERAL PROVISIONS
Article 1. Scope and subjects of regulation
1. Scope of regulation: This Regulation guides the setting up and operation of the risk management system in activities of securities companies.
2. Subjects of regulation: Securities companies and organizations as well as individuals relating to the risk management system in activities of securities companies.
Article 2. Interpretation of terms
In this Regulation, the following terms are construed as follows:
1. Risks mean events that are not sure to happen in business activities, cause disadvantageous influences to business target implementation of securities companies.
2. Market risks mean risks that change values of assets being owned under disadvantageous directions.
3. Payment risks mean risks that happen when partners fail to pay on time or cannot transfer assets on time as committed.
4. Liquidity risks mean risks that happen when securities companies cannot pay their matured financial obligations or cannot change financial instruments into cash with a rational value in short term due to lack of liquidity in market.
5. Operational risks mean risks that happen because of technical defects, faults in system and professional process, personal faults during doing professional activities or because of lack of business capital arising from expenses, losses from investment activities or due to other objective reasons.
6. Legal risks mean risk that arise from the non-compliance of legal provisions relating to business activities, and from the contract cancellation because the contract is illegal, fall beyond power, have lacked terms or incomplete standards, or due to other reasons.
7. Risk-concentrated situation means situation that mainly concentrate on one or some key risks of which damages can cause bad and serious effects to financial situation and uninterrupted operation capability of securities companies.
8. Risk level means level of damages that calculate in money if risk happens.
9. Risk limit means capital amount that must be allocated in order to respond the risk which can cause maximum damage at a level that all company or each business division can bear in a defined time and confidence level.
10. Ability of risk acceptance means ability in use of equity capital, (estimated) expected profits and available financial resources for covering at all time for all key risks and inherent potential damages that are accepted by a securities company.
11. Key: The key level is defined in correlation with structure, scale and complex nature of each securities company. The key level of a risk or an activity depends on its impacting level at the present and in the future for income or capital of a securities company.
12. Risk situation means value part of asset or debt impacted by a specific risk type.
13. Urgent situation includes unexpected or irregular situations that can cause key damages on finance, human resource, material facilities and ask securities companies must immediately have actions to respond.
Chapter 2.
PRINCIPLES OF RISK MANAGEMENT
Article 3. Principles of risk management in securities companies
1. Securities companies must set up and operate a risk management system in conformity with their business activity conditions, at least meeting provisions in this Regulation.
2. The risk management system of securities companies must include a complete organizational structure, a unified operation mechanism and a set of risk management process that handles at least five types of key risk as follows: market risk, payment risk, liquidity risk, operational risk and legal risk. Besides that, securities companies must manage the risk-concentrated situation in association with key risks. The risk management system of a securities company must ensure the following elements:
