Issuers of securities to invest 5 percent of profits in risk fund

From the 2014 fiscal year onwards, securities companies and fund management firms will have to set aside 5 percent of their profits for the financial reserve and professional risk fund once previous losses are covered and corporate income deductions have been made in accordance with the Law on Corporate Income Tax.

This is stipulated by Circular 146/2014, which was issued by the Ministry of Finance to provide guidance for securities companies and fund management firms.

In addition, the businesses have to deduct another 5 percent from their profits for the chartered capital supplementary reserve fund, according to the circular.

The deductions will stop when the balance of the two funds reaches 10 percent of the firms’ chartered capital. Shareholders’ annual congresses and executive boards will decide how to distribute the remaining profit.

The new regulation bans firms from using the two funds to pay dividends.

The financial reserve and professional risk fund is to be used to pay for property losses arising from the firms’ operations, once reimbursements from insurance companies and payments from organisations or individuals who caused the damages have been received.-VNA