Regulations on limits on public funds in Vietnam

Regulations on limits on public funds in Vietnam (Internet image) 

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

1. Regulations on limits on public funds in Vietnam

According to Article 110 of the Law on Securities 2019, limits on public funds in Vietnam are as follows:

- The fund management company must not use a public fund’s capital and assets to:

+ Invest in fund certificates of the same public fund;

+ Invest in more than 10% of the total value outstanding securities of an issuer, except Government bonds;

+ Invest more than 20% of the public fund's total asset in outstanding securities of an issuer, except Government bonds;

+ Invest more than 10% of the closed-end fund in real estate, unless it is a real estate investment fund; invest the open-end fund’s capital in real estate;

+ Invest more than 30% total assets of a public fund in companies in the same group of: parent company-subsidiaries; companies holding more than 35% of each other’s shares/stakes; subsidiaries of the same parent company;

+ Lend money or provide loan guarantees;

+ Other limits on investments in other securities investment funds and each type of fund shall be specified by the Minister of Finance.

- A fund management company must not lend money to sponsor a public fund, except for short-term loans prescribed by banking laws for covering necessary costs of the public fund or pay for transactions of fund certificates with investors. The total value of short-term loans given by a public fund must not exceed 5% of its net asset value at any time and the loan term shall not exceed 30 days.

- A public fund’s investments may only exceed the limits specified in Points b, c, d, dd and g Clause 1 of Article 110 of the Law on Securities 2019 for the following reasons:

+ Price fluctuation of the assets in the fund’s investment portfolio;

+ Making payments of the funds as prescribed by law;

+ Consolidation or acquisition of the issuers;

+ The fund is newly established or established from a division, consolidation or acquisition of funds within the last 06 months from its licensing date;

+ The fund is undergoing dissolution.

- The fund management company shall submit reports to SSC and disclose information about the investments beyond the limits specified in Clause 1 of Article 110 of the Law on Securities 2019.

Within 03 months from the day on which the limits are exceeded, the fund management company shall adjust the investment portfolio within the limits in Clause 1 of Article 110 of the Law on Securities 2019.

2. Regulations on raising capital to establish public funds in Vietnam

Regulations on raising capital to establish public funds according to Article 108 of the Law on Securities 2019 are as follows:

- The capital for establishment of a public fund shall be raised within 90 days from the effective date of the certificate of public offering of fund certificates. A public fund will be established if the following requirements are satisfied:

+ There are at least 100 investors, not including professional investors in fund certificates, except exchange traded fund (ETF);

+ The total value of fund certificates sold is at least 50 billion VND.

- The entire capital contributed by investors shall be transferred to a separate account under management of the supervisory bank and shall not be used until capital is fully raised. The fund management company shall submit SSC a capital raising report verified by the supervisory bank within 10 days from the completion date of capital raising.

- In case the requirements specified in Clause 1 of Article 108 of the Law on Securities 2019 are not fully satisfied, the fund management company shall return the money to the investors in full within 15 days from the completion date of capital raising. The fund management company shall pay the costs and bear other financial obligations of the capital raising.

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