Summary of administrative penalties for violations of regulations on operation of fund management companies in Vietnam

Specifically, according to Decree No. 108/2013/NĐ-CP of Vietnam’s Government, fines for violations of regulations on operation of fund management companies are as follows:

- A fine of between VND 50,000,000 and 70,000,000 shall be imposed on fund management companies conducting any of the following violations:

+ Conducting violations specified in points a, b and d clause 1 Article 21 of this Decree;

+ Failing to sign contract in writing with customers when provide service for customers or contract have insufficient content as prescribed by law;

+ Failing to comply with its charter or investment portfolio management contracts;

+ Failing to separate head office, equipment, computer system, information technology infrastructure from other economic organizations; failing to separate the database among professional division with potential conflicts on benefits in company;

+ Failing to supply timely, sufficient and honest information to depository bank, supervisory bank as prescribed by law.

- A fine of between VND 70,000.000 and 100.000.000 shall be imposed on a fund management company or a Vietnam-based branch of a fund management company which conducts any of following violations:

+ Failing to set up a system of internal control, division of internal control, internal audit in accordance with regulations; failing to ensure personal structure at divisions of internal control, internal audit to meet conditions in accordance with regulations; failing to supervise and prevent conflicts of interests within customers, or between the company, securities practitioners and customers in accordance with law;

+ Violating regulations on liability of fund management company in performing the professional operations of securities investment advisory; conducting banned acts in professional operations of securities investment advisory;

+ Failing to comply with process of distributing transaction orders, distributing transaction assets upon conducting transactions for investment funds, securities investment companies, trusting investors and itself;

+ Acting as a buying or selling partner in a transaction in assets for trusted investment in contravention of law;

+ Failing to keep the prescribed investment ratio or failing to readjust the investment portfolio under law;

+ Failing to conduct in accordance with regulations on authorized operation of fund Management Company;

+ Anticipating or guaranteeing its customers of a ratio of earnings or profits to their investments or securing its customers of no loss incurred; agreeing or giving a specific interest or sharing profit or loss with customers; deciding on investments on its customers' behalf, unless it is so provided by law.

- A fine of between VND 100,000,000 and 150,000,000 shall be imposed on a fund management company conducting any of the following violations:

+ Conducting violations specified in points b, d and e clause 3 Article 21 of this Decree;

+ Failing to comply with the prescribed pricing process or wrongly pricing fund certificates, or wrongly valuating the net assets or investment portfolio of a fund, securities investment company, or trusting investor;

+ Infringing regulations on limitations on operation of fund management companies, their affiliated persons and staff; infringing regulations on limitations on operation of securities investment companies; infringing regulations on investment funds for real estate;

+ Failing to ensure that investment in assets of the entrusting customers being foreign individuals or organizations complies with law on foreign exchange management and ratio of ownership in Vietnamese enterprises.

- A fine of between VND 150,000,000 and 200,000,000 shall be imposed on a fund management company conducting any of the following violations:

+ Shirking its legal obligations, limiting the scope of its compensation and financial liability, transferring risks from it to investors or unfairly forcing investors to pay compensations;

+ Using assets of an investment fund or securities investment company to invest in such investment fund or securities investment company or other investment funds or securities investment companies established and operating in Vietnam or to contribute capital to a joint venture or association or to make financial investments in itself and its affiliated persons;

+ Making financial investments, buying shares, contributed capital, bonds, participating in capital contribution to establish enterprises; holding shares in contravention of regulations;

+ Borrowing loans to finance operation of an investment fund, securities Investment Company in contravention of law;

+ Using assets of an investment fund or securities investment company or trusted assets to pay debts, provide loans or guarantee any loan of the company, its affiliated persons or any partner;

+ Providing loans or consigning its capital to institutions or individuals in contravention of law;

+ Agreeing customers to borrow its securities or other assets; broking transaction between customers and the third party;

+ Failing to put into the depository and separately manage assets and capital of each entrusting investor, investment fund or securities investment company managed by it; failing to separate entrusted assets, assets of investment fund, securities Investment Company from its assets;

+ Using capital of entrusting customers for investment in contravention of law;

+ Acting in collusion with securities companies to conduct excessive transactions with securities in the investment portfolio of a fund managed by a fund management company for Securities Company to earn benefit from brokerage charges.

View more details at Decree No. 108/2013/NĐ-CP of Vietnam’s Government, effective from November 15, 2013.

Ty Na

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