Does the Ministry of Finance of Vietnam propose to delay the implementation of regulations on determining the status of professional securities investors?

Main Content

• Does the Ministry of Finance of Vietnam propose to delay the implementation of regulations on determining the status of professional securities investors?
• Proposal to change the term of issued bonds?
• Proposing to delay the implementation of the regulation on the mandatory credit rating requirement?

Does the Ministry of Finance of Vietnam propose to delay the implementation of regulations on determining the status of professional securities investors?

Currently, the Ministry of Finance of Vietnam is developing a Draft Decree amending and supplementing Decree 65/2022/ND-CP of Vietnam amending and supplementing a number of articles of Decree 153/2020/ND-CP prescribing private placement and trading of privately placed corporate bonds in domestic market and offering of corporate bonds in international market and collecting opinions of affected subjects.

In the immediate future, there are many opinions that at present, many subprime investors are buying individual corporate bonds.

According to the provisions of Decree 65/2022/ND-CP of Vietnam, investors who buy bonds will not be identified as professional securities investors. Therefore, the Ministry of Finance of Vietnam's draft decision to delay the application of professional investor standards is actually clearing the way for the debt extension/relaxation; creating conditions for subprime investors to continue to buy new bonds for businesses to reverse debt.

Specifically, Clause 1, Article 1 of the Draft Decree amending Decree 65/2022/ND-CP of Vietnam stipulates as follows:

Amending and supplementing Article 3 of Decree No. 65/2022/ND-CP of Vietnam as follows:

1. To add Clause 1a as follows:

“1a. The following regulations apply from January 1, 2024:

a) Regulations on determining the status of professional securities investors as individuals at Point d, Clause 1, Article 8 of Decree No. 153/2020/ND-CP of Vietnam are amended in Clause 6, Article 1.

According to that, when this Decree is passed, the provisions at Point d, Clause 1, Article 8 of Decree 153/2020/ND-CP of Vietnam (amended by Clause 6, Article 1 of Decree 65/2022/ND-CP of Vietnam) will push The application period is postponed to January 1, 2024.

Thus, the subjects to buy bonds in 2023 will be regulated as follows:

- For non-convertible bonds without warrants: bond buyers are professional securities investors in accordance with the securities law.

- For convertible bonds and bonds with warrants: bond buyers are professional securities investors and strategic investors, in which the number of strategic investors must be less than 100 investors.

- Professional securities investor means an investor with financial capacity or professional qualifications in securities as prescribed in Article 11 of the Law on Securities.

Organizations responsible for identifying professional securities investors and documents identifying professional securities investors shall comply with the provisions of Articles 4 and 5 of Decree No. 155/2020/ND-CP.

Does the Ministry of Finance of Vietnam propose to delay the implementation of regulations on determining the status of professional securities investors?

Proposal to change the term of issued bonds?

According to the provisions at Point b, Clause 3, Article 3 of Decree 65/2022/ND-CP of Vietnam as follows:

Transition

…

3. With regard to corporate bonds which have been issued before the effective date of this Decree but are still outstanding at the effective date of this Decree:

a) The issuer shall comply with the provisions on reporting, periodic information disclosure and ad hoc information disclosure laid down in this Decree and specific guidelines given by the Ministry of Finance of Vietnam of Vietnam.

b) The issuer shall not be allowed to change the term of its issued bonds.

Thus, if this draft Decree is approved, enterprises will be allowed to change the term, swap the issued bonds in accordance with the law on bond issuance.

The extension of the bond's term but not exceeding 02 years compared with the term in the bond issuance plan announced to investors.

Proposing to delay the implementation of the regulation on the mandatory credit rating requirement?

Currently, the regulations on credit rating results for bond issuers according to the provisions of Point e, Clause 2, Article 12 of Decree 153/2020/ND-CP of Vietnam are amended in Clause 9 Article 1 of Decree 65/2022/ND-CP of Vietnam as follows:

Bond offering dossier

…

2. A bond offering dossier shall include the following documents:

…

e) The report on credit rating of the issuer that is subject to compulsory credit rating as prescribed in Clause 2 Article 19 of the Decree No. 155/2020/ND-CP of which the time of application is prescribed in Clause 3 Article 310 of the same document.

Thus, this regulation requires credit rating results for bond issuers when:

- The total value of bonds at their face value raised every 12 months exceeds 500 billion VND and exceeds 50% of the equity.

- The bond outstanding at face value on the offering registration date exceeds 100% of the equity.

This regulation leads to the fact that in the current economic context, it is difficult for enterprises to issue corporate bonds as well as meet credit rating requirements.

In the Draft Decree amending this regulation, the Ministry of Finance of Vietnam submitted to the Government a proposal to delay the application of this regulation to January 1, 2024. This helps reduce the issuance conditions for businesses with a lot of bond debt, especially in the real estate sector.