Regulations on operational authorization of securities investment fund management companies in Vietnam

Regulations on operational authorization of securities investment fund management companies in Vietnam (Internet image)

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

1. Regulations on operational authorization of securities investment fund management companies in Vietnam

Regulations on authorization to operate with securities investment fund management companies according to Article 12 of Circular 99/2020/TT-BTC are as follows:

- During its business, the fund management company may:

+ Authorize the depository bank, supervisory bank, and VSDCC to provide fund management services or act as transfer agent for securities investment funds and securities investment companies;

+ Authorize foreign organizations to provide consulting services and manage assets abroad of trustors.

- When giving authorization as prescribed in Clause 1 of Article 12 of Circular 99/2020/TT-BTC, the fund management company must ensure that:

+ The fund management company is allowed to give authorization as prescribed in the fund’s charter, charter of the securities investment company and trust agreement. In case of authorization prescribed in Point b Clause 1 of Article 12 of Circular 99/2020/TT-BTC, the foreign organization must be licensed by the foreign securities authority to perform authorized operations and bear the supervision and inspection of this authority;

+ Information about the authorized party, scope of operations, functions and tasks of the authorized party must be specified in the prospectus and provided for trustors.

The General Meeting of Investors of the securities investment fund, the General Meeting of Shareholders of the securities investment company, and trustors are entitled to request the fund management company to replace the authorized party where necessary;

+ The authorized party must be capable and have appropriate system, personnel and experience to perform authorized operations;  

+ The personnel, operational procedures, reporting and report approving system of the department in charge of providing relevant authorized services of the authorized party must be separated from those of its other departments;

+ The authorized party shall provide the fund management company with independent audit reports on authorized operations and documents to serve the inspection by the fund management company as prescribed in Point c Clause 3 and Clause 4 of Article 12 of Circular 99/2020/TT-BTC;

+ The operational authorization and authorized parties in Point a Clause 1 of Article 12 of Circular 99/2020/TT-BTC must be specified in the fund’s charter/charter of securities investment company.

The operational authorization and authorized parties in Point b Clause 1 of Article 12 of Circular 99/2020/TT-BTC must be approved in writing by the General Meeting of Investors of the securities investment fund, the General Meeting of Shareholders of the securities investment company, and trustors.

- When giving authorization, the fund management company shall:

+ Before entering into service contracts with the authorized party, the fund management company must carry out the due diligence and examine material facilities of such authorized party in order to ensure that it has adequate material facilities, technical solutions, operational process, and experienced and qualified personnel for performing authorized operations;

+ Enter into the authorization contract with the authorized party. The authorization contract shall be prepared according to the form in the Appendix IX enclosed with Circular 99/2020/TT-BTC;

+ Carry out regular inspections to ensure that authorized operations have been prudently and safely performed in conformity with regulations of law, the fund's charter, charter of the securities investment company, trust agreement, and the quality of services provided by the authorized party is conformable with criteria and requirements of the company and trustors.

The fund management company is entitled to employ independent consultants or services provided by other professional organizations that are operating under the law to fulfill its responsibility in this Point. 

The fund management company is required to prepare monthly report on inspection of authorized operations;

+ Maintain employees with experience, qualification and skills appropriate for supervising, identifying and managing risks arisen from authorized operations;

+ Establish systems/procedures to ensure that the fund management company, independent audit organization and SSC are able to access necessary information for inspecting and supervising authorized operations, evaluating and managing risks arising from such operations at any times;

+ The authorization shall neither reduce nor change responsibilities of the fund management company towards its trustors.

The fund management company shall accept any financial and legal liabilities arising from its authorization, except legal liabilities and service charges/fees which are agreed upon and paid directly to the authorized party under the trust agreement, supervisory contract or depository contract, as prescribed in the fund’s charter, charter of the securities investment company and relevant laws.

The fund management company must ensure the continuity of authorized operations, and avoid causing any interruption and influence on investments and provision of services to trustors;

+ Provide relevant information to the authorized party in a sufficient, timely and accurate manner in order that the authorized party can fully and promptly fulfill its rights and duties within the scope of authorization;

+ Adequately, punctually and accurately keep instructions, requests and documents sent to the authorized party for performing authorized operations, the authorization contract and record of assessment of capacity and material facilities of the authorized part. These documents must be provided at the request of SSC;

+ Within 10 days from the conclusion of the authorization contract with the authorized party to perform the authorized operations in Point b Clause 1 of Article 12 of Circular 99/2020/TT-BTC, the fund management company shall notify SSC of this authorization and provide it with documents proving the authorized party’s fulfillment of the requirements in Clause 2 of Article 12 of Circular 99/2020/TT-BTC.

- Inspection reports prescribed in Point c Clause 3 of Article 12 of Circular 99/2020/TT-BTC and other relevant documents must be provided for the Board of Directors, Board of Members or owner of the fund management company, the fund’s representative board, Board of Directors of the securities investment company, relevant supervisory bank and SSC within 30 days from the reporting date.

2. Regulations on the Board of Directors, Board of Members and Board of Controllers of securities investment fund management companies in Vietnam

Regulations on the Board of Directors, Board of Members and Board of Controllers of securities investment fund management companies in Vietnam according to Article 4 of Circular 99/2020/TT-BTC are as follows:

- Organizational structure, rights, obligations and operations of the Board of Directors, Board of Members, Board of Controllers, audit committee, internal audit unit, Executive Board; eligibility requirements, election, dismissal, rights and obligations of members and Chairperson of the Board of Directors, members and Chairperson of the Board of Members, Company’s President, Chief Controller, Controllers, Chairperson and members of the audit committee shall be specified in the company’s charter, conformable with regulations on company administration applicable to public companies and regulations on enterprises, and not contrary to regulations herein.

- A member of the Board of Directors or Board of Members of a fund management company may not act as a member of the Board of Directors, Board of Members, or Executive Board or fund management practitioner of another fund management company or a member of the Board of Directors, Board of Members, or Executive Board or employee of the depository bank or supervisory bank providing services to securities investment fund or securities investment company managed by the fund management company.

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