Vietnam: Prudential indicators of deductions from liquid capitals of a fund management company

According to Article 6 of the Circular No. 91/2020/TT-BTC of the Ministry of Finance of Vietnam, deductions from liquid capitals of a fund management company include:

- The whole decrease in value of investments, excluding the securities specified in Clause 5 of this Article, shall be calculated according to the difference between the book value and the market price determined according to Appendix II enclosed herewith.

- Other deductions shall be determined according to Appendix V enclosed herewith, including:

+ Long-term asset indicators, except for those specified in Clause 3 of this Article;

+ The following short-term asset indicators:

• Securities specified in Clause 5 of this Article in the short-term financial asset ratio;

• Prepayments;

• Receivables with the payback period or remaining maturity of over ninety (90) days;

• Advances that must be returned within over ninety (90) days;

• Other short-term assets, except for those specified in Clause 3 of this Article.

+ The amounts mentioned in qualified opinions, adverse opinions or disclaimer of opinions (if any) are included in the audited and examined financial statements but are yet to be deducted from the liquid capitals as prescribed in Points a, b of this Clause. In case the audit organization confirms that it no longer has qualified opinions, the securities-trading organization is not required to deduct these amounts.

- The following indicators are not included in the deductions from liquid capitals specified at Points a and b, Clause 2 of this Article:

+ Assets against which market risks shall be identified as prescribed in Clause 2, Article 9 of this Circular, except for the securities specified in Clause 5 of this Article;

+ Provision for investment markdown;

+ Provision for non-performing receivables.

+ The contracts and transactions mentioned in Point k Clause 1 Article 10 of this Circular.

- When determining assets to be deducted from liquid capitals specified in Point a and Point b, Clause 2 of this Article, the securities-trading organization may reduce the value of deductions as follows:

+ For the asset used for securing the obligation of a securities-trading organization or third party, upon calculation of deductions, the minimum value of the market value of these assets determined as prescribed in the Appendix II enclosed herewith (if any), book value and remaining value of the obligation may be deducted;

+ For the asset secured by client’s property, upon calculation of deductions, the minimum value of the market value of these assets determined as prescribed in Clause 6, Article 10 of this Circular and book value may be deducted.

- The following securities included in the ratio of short-term and long-term financial assets shall be considered deductions from liquid capitals:

+ Securities issued by organizations that are related to the securities-trading organization in the following manners:

• They are parent companies, subsidiaries, joint-venture companies of the securities-trading organization;

• They are subsidiaries of the parent company of the securities-trading organization.

+ Securities to be restricted from transfer for over ninety (90) days from the date of calculation.

View more details at the Circular No. 91/2020/TT-BTC of the Ministry of Finance of Vietnam, effective from January 01, 2021.

Le Vy

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE