What types of assets are securities investment funds in Vietnam allowed to invest in? Can securities investment fund management companies in Vietnam use fund’s capital to make profitable loans?
What types of assets are securities investment funds in Vietnam allowed to invest in?
Pursuant to Clause 2, Article 5 of Circular No. 98/2020/TT-BTC stipulating this content as follows:
Fund’s investments and investment portfolio
…
2. The fund may invest in the following assets:
a) Deposits at commercial banks as prescribed by the Law on banking;
b) Money market instruments, including financial instruments and negotiable instruments as prescribed by law;
c) Government’s debt instruments, Government-backed bonds and municipal bonds;
d) Listed shares, shares registered for trading, bonds listed on SE, and public fund certificates;
dd) Unlisted shares of issuers that are operating under the law of Vietnam; shares of joint-stock companies or stakes of limited liability companies;
e) Rights arising in connection with securities held by the fund;
g) Other securities and assets as prescribed by law.
Thus, securities investment funds may invest in the following assets:
- Deposits at commercial banks as prescribed by the Law on banking;
- Money market instruments, including financial instruments and negotiable instruments as prescribed by law;
- Government’s debt instruments, Government-backed bonds and municipal bonds;
- Listed shares, shares registered for trading, bonds listed on SE, and public fund certificates;
- Unlisted shares of issuers that are operating under the law of Vietnam; shares of joint-stock companies or stakes of limited liability companies;
- Rights arising in connection with securities held by the fund;
- Other securities and assets as prescribed by law.
What types of assets are securities investment funds in Vietnam allowed to invest in? Can securities investment fund management companies in Vietnam use fund’s capital to make profitable loans?
Can securities investment fund management companies in Vietnam use fund’s capital to make profitable loans?
Pursuant to point b, clause 5 Article 5 of Circular No. 98/2020/TT-BTC stipulating as follows:
Fund’s investments and investment portfolio
…
5. When managing a private fund, the fund management company shall:
a) Not use the fund’s capital and assets to make investments in that fund;
b) Not use the fund’s capital and assets to provide loans or loan guarantees; not underwrite the offering of securities;
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Thus, when managing a private fund, the fund management company shall not use the fund’s capital and assets to provide loans or loan guarantees; not underwrite the offering of securities.
What should a fund management company not do when managing a private fund?
Pursuant to Clause 5, Article 5 of Circular No. 98/2020/TT-BTC stipulating as follows:
When managing a private fund, the fund management company shall:
- Not use the fund’s capital and assets to make investments in that fund;
- Not use the fund’s capital and assets to provide loans or loan guarantees; not underwrite the offering of securities;
At the same time, invest in public fund certificates and shares of public securities investment companies managed by other fund management companies, but ensure the following limits:
- Not invest in more than 10% of total outstanding fund certificates of a public fund or total outstanding shares of a public securities investment company;
- Not invest more than 20% of total value of its assets in fund certificates of a public fund or shares of a public securities investment company;
- Not invest more than 30% of total value of its assets in public fund certificates or shares of public securities investment companies.
In addition, if permitted in the fund’s charter, the fund is allowed to get mortgage loans, overdraft facility or loans in other form from the custodian bank, borrow money to purchase securities (margin trading) according to the following principles:
+ Borrowing of assets must be conformable with regulations of law;
+ Borrowing limit shall be decided by the General Meeting of Investors, provided that total debts and amounts payable of the fund shall not exceed 30% of total value of the fund's assets at any time;
+ Organizational structure and operations of the credit department of the custodian bank must be separated from the fund’s depository department; credit activities are independent from depository activities and fall beyond the scope of the depository contract;
+ The fund management company shall provide information about rights and interests of the custodian bank and potential conflict of interest for the General Meeting of Investors for consideration.
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