Principles of fund certificate subscription and redemption orders in Vietnam

Principles of fund certificate subscription and redemption orders in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What is a fund certificate?

According to Clause 4, Article 4 of the Law on Securities 2019, a fund certificates are securities that certify their holders’ ownership of a stake in a securities investment fund.

Specifically, securities include the following assets:

- Shares, bonds, fund certificates;

- Warrants, secured warrants, pull options, depository receipts;

- Derivatives;

- Other kinds of securities defined by the Government.

(Clause 1, Article 4 of the Law on Securities 2019)

2. Fund certificate subscription and redemption orders in Vietnam

2.1. Principles of fund certificate subscription orders

Specifically, in Clause 1, Article 31 of Circular 98/2020/TT-BTC, the subscription orders shall be implemented according to the following rules:

- An investor’s subscription order must be accompanied by valid documents certifying the investor's payment made to the fund’s account or shall be accepted after the supervisory bank has given a confirmation to the fund management company, distribution agent or relevant service provider that it has received the full payment for fund certificates from the investor or nominee.

The payment confirmation may be made in writing, by email, or through the electronic information system of the supervisory bank with the approval of the fund management company;

- A nominee is allowed to make payment according to the difference between subscription orders and redemption orders;

- Investors may pay for fund certificates by bank transfer or other methods as prescribed in the fund’s charter and the prospectus. Payments for fund certificates shall be transferred directly to the fund’s account opened at the supervisory bank as prescribed in Clause 2 of Article 31 of Circular 98/2020/TT-BTC and shall not transferred to other accounts of distribution agents;

- The value of a subscription order shall not be smaller than the minimum buying value (if any) prescribed in the fund's charter and the prospectus;

- The number of fund units sold to an investor or nominee may be an odd number in decimal format, and up to the second decimal place.

2.2. Principles of fund certificate redemption orders

According to Clause 1, Article 32 of Circular 98/2020/TT-BTC, the redemption orders shall be implemented according to the following rules:

- A redemption order shall be implemented only when the investor or nominee has enough fund certificates for redemption and the remaining number of fund certificates of the investor after redemption transaction shall not be lower than the prescribed minimum number of fund certificates (if any) for maintaining the investor’s account or sub-account prescribed in the fund’s charter and prospectus;

- A redemption order may not be implemented or may be implemented partially as prescribed in Clause 1 Article 33 of Circular 98/2020/TT-BTC;

- The payment shall be made by the deadline prescribed in the fund’s charter and prospectus and within 05 working days from the fund certificate trading day except the case in Clause 3 Article 33 of Circular 98/2020/TT-BTC;

- Payment for the sold fund certificates shall be transferred to the investor’s or nominee’s bank account or another account designated by the investor.

3. Requirements for initial public offering of fund certificates in Vietnam

According to Clause 5, Article 15 of the Law on Securities 2019, the requirements for initial public offering of fund certificates:

- The total value of the offered fund certificates is 50 billion VND;

- There is a plan for issuance and use of capital generated by the offering as prescribed by this Law;

- The offering is supervised by a supervisory bank as prescribed by this Law;

- The publicly offered fund certificates are listed on the securities trading system after the end of the offering, except open-end fund certificates.

Tran Thanh Rin

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