Rights and obligations of branches of a foreign fund management company in Vietnam

Rights and obligations of branches of a foreign fund management company in Vietnam (Internet image)

Regarding this issue, LawNet responded as follows:

1. Rights of branches of a foreign fund management company in Vietnam

According to Article 19 of Circular 97/2020/TT-BTC, branches of a foreign fund management company in Vietnamietnam have the following rights:

- Use assets raised overseas to support projects/enterprises, provide loans or perform investment contracts under orders from trustors, investment trust agreements, charters of foreign organizations, foreign funds in accordance with regulations of the law on foreign exchange management, law on banking and other relevant laws.

- Transfer the branch’s profits overseas under the law of Vietnam.

- Perform securities trading activities in conformity with the license for establishment and operation, the law of Vietnam and international treaties to which Vietnam is a signatory.

2. Obligations of branches of a foreign fund management company in Vietnam

According to Article 20 of Circular 97/2020/TT-BTC, the obligations of branches of a foreign fund management company in Vietnam are as follows:

- A branch is not allowed to raise capital in Vietnam for management in any form.

- During the management of assets, the branch must comply with the following regulations:

+ Unless otherwise ordered by trustors or prescribed by investment trust agreements or charters of foreign organizations, when providing asset management services to clients, the branch must comply with regulations on depositing, separately manage assets of each client, asset transactions between investment portfolios of trustors in accordance with regulations applicable to domestic fund management companies;

+ Protect confidentiality of information about clients and their asset transactions and investment portfolios, and other relevant information, unless such information is provided at the request of SSC or a competent authority;

+ Comply with regulations on foreign exchange, limitation on ownership in Vietnamese enterprises, anti-money laundering and other relevant laws;

+ Do not provide loans in the territory of Vietnam to clients, other entities or itself in any form; do not use trust assets or its assets as collateral, deposit or security for loans in the territory of Vietnam, including for trustors, other entities or itself;

+ Do not offer or issue securities to raise capital in the territory of Vietnam;

- When submitting ownership reports, reporting and disclosing information about transactions on securities market, the branch shall:

+ Represent trustors to report and disclose information about transactions in accordance with the Law on securities.

The branch and trustors must comply with regulations on reporting on ownership and disclosure of information on securities market which apply to related persons, major shareholders and internal actors;

+ Before and after each securities transaction in Vietnam, a member of the management board or employee of the branch must report it to the branch’s internal control department. A report on the abovementioned personal transaction must include information about type (code) of securities, quantity, trading price, and securities company where trading account is opened.

Reports on personal transactions must be kept and managed by the branch's internal control department, and provided at the request of SSC.

- The branch may only use allocated capital and capital of trustors (excluding shares on portfolios of trustors that are exchange-traded funds) for performing tender offers as prescribed in Article 35 of the Law on securities with the written consent of trustors, or represent trustors in respect of tender offers, bid prices, estimated quantity of assets and method of transfer of assets after a tender offer.

The branch shall perform tender offers in accordance with regulations on tender offers laid down in the Law on securities.

- During its operations, the branch and its parent company shall comply with the followings:

+ Within 30 days after the parent company completes its investments in subsidiaries, joint ventures or associated companies in Vietnam, the branch shall report such investments to SSC; the parent company is not allowed to contribute capital, buy shares or stakes to own more than 5% of charter capital of a fund management company in Vietnam;

+ The branch is not allowed to contribute capital to, buy shares or stakes from fund management companies and securities companies in Vietnam, unless the purchase results in ownership or joint ownership with related persons of up to 5% of voting shares of a fund management company or securities company that has been listed or registered on the Stock Exchange.

- The branch must promulgate business process, establish and operate a risk management system according to SSC’s guidance or adopt internal regulations that are promulgated by the parent company and conformable with its business to ensure the availability of the mechanism for control and risk management associated with each product or business operation.

- The branch shall provide annual training for its employees or request its practitioners to attend training courses provided by SSC (if any) in order to ensure that its employees are fully updated with skills, professional operations and knowledge about law.

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