What is proprietary trading of outward portfolio investments under the law in Vietnam?

What is proprietary trading of outward portfolio investments under the law in Vietnam? (Internet image)

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

1. What is proprietary trading of outward portfolio investments?

According to the provisions of Clause 3, Article 3 of Decree 135/2015/ND-CP, proprietary trading of outward portfolio investments refers to an organization permitted for proprietary trading and for its own account purchasing and selling securities and valuable papers in foreign nations or making investments through securities investment funds and financial intermediaries in foreign nations.

2. Entities eligible for proprietary trading of outward portfolio investments in Vietnam

The organizations permitted for proprietary trading of outward portfolio investments include:

- Securities companies, fund management companies.

- Securities investment funds through fund management companies (referred to as securities investment funds), securities investment companies.

- Insurance companies.

- Commercial banks.

- General financial companies.

- State capital investment corporation.

(Article 13 of Decree 135/2015/ND-CP)

3. Requirements for the approval of proprietary trading of outward portfolio investments and written certification of outward portfolio investment registration in Vietnam

3.1 Requirements for proprietary trading of outward portfolio investments

Requirements for proprietary trading of outward portfolio investments include:

- A proprietary trader to be eligible for proprietary trading of outward portfolio investments must receive the certificate of outward portfolio investment registration from an authorized body (not applicable to State Capital Investment Corporation, securities investment funds, securities investment companies);

- A securities investment fund or securities investment company to be eligible for proprietary trading of outward portfolio investments must approved by an authorized body of outward portfolio investments.

3.2 For securities companies, fund management companies and insurance companies

To receive the certificate of outward portfolio investment registration, securities companies, fund management companies and insurance companies must fulfill these requirements:

- Gain profit in 03 consecutive years preceding the year when the application for the certificate of outward portfolio investment registration is submitted.

Such profit shall be shown in the audited financial statements that bear only unqualified opinions according to regulations adopted by the Ministry of Finance. 

Financial statements must be audited by independent auditing firms approved and announced by the Ministry of Finance according to regulations on independent auditing of public interest entities;

- Fulfill all financial duties for the Government and incur no tax debts against the government's treasury;

- Have internal procedures and systems for internal control, audit, risk identification and management related to the activities of outward portfolio investment;

- Abide by the effective regulations of specific laws on capital, financial safety norms, investment limits for securities companies, fund management companies and insurance companies;

3.3 Conditions of approval for outward portfolio investments of securities investment funds and securities investment companies

Securities investment funds and securities investment companies to be eligible for outward portfolio investments must fulfill these requirements:

- The regulations of securities investment funds and securities investment companies have rules permitting outward portfolio investments.

- Fund management companies managing securities investment funds and securities investment companies making outward portfolio investments have internal procedures, systems for internal control, audit, risk identification and management related to the outward portfolio investment; fulfill the financial safety norms according to regulations adopted by the Ministry of Finance.

To make outward portfolio investments, securities investment companies self-managing capitals must fulfill the requirements in Point c Clause 2 of Article 14 of Decree 135/2015/ND-CP;

- Overseas investment assets of securities investment funds and securities investment companies must be deposited in an organization licensed for depository activities according to foreign laws and entering a depository contract with a depository bank or supervising bank in Vietnam of such securities investment funds and securities investment companies.

3.4 Conditions of approval for outward portfolio investments of proprietary traders, as commercial banks and general financial companies

Proprietary traders, as commercial banks and general financial companies to be eligible for the certificates of outward portfolio investment registration, must fulfill these requirements:

- Have permission to conduct foreign exchange activities in international markets;

- Gain profit in 03 consecutive years preceding the year when the application for the certificate of outward portfolio investment registration is submitted.

Such profit shall be shown in the audited financial statements that bear only unqualified opinions according to regulations adopted by the Ministry of Finance. Financial statements must be audited by independent auditing firms that are not on the list of auditing firms ineligible for auditing credit institutions and branches of foreign banks as announced by the State Bank of Vietnam;

- Fulfill all financial duties for the Government and incur no tax debts against the government's treasury;

- Have internal procedures and systems for internal control, audit, risk identification and management related to the proprietary trading of outward portfolio investment;

- Have facilities, techniques and human resources to guarantee the proprietary trading of outward portfolio investments according to the laws;

- Conform to the effective regulations of Vietnam State Bank on limits and safety guaranteeing ratios in the sector of banking;

(Article 14 of Decree 135/2015/ND-CP (amended in Decree 16/2019/ND-CP))

Nguyen Ngoc Que Anh

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE