Providing guidance on obligations of organizations and individuals arising from foreign investment in Vietnam’s securities market
On June 30, 2021, the Ministry of Finance issued Circular No.51/2021/TT-BTC (hereinafter referred to as “Circular 51“) guiding the implementation of Clause 6, Article 138 of Decree No. 155/2020/ND-CP on obligations of foreign investors, organizations providing services to foreign investors, and other organizations and individuals involved in foreign investment in Vietnam’s securities market.
This article includes some of the latest and prominent regulations of the Ministry of Finance on the use of indirect investment capital account, obligations of the foreign investors and institutions providing securities services to foreign investors.
1. The use of indirect investment capital accounts
- Under Article 138 of Decree No. 155/2020/ND-CP, the foreign investors investing in the Vietnam’s securities market must open and carry out all transactions through an indirect investment capital account as follows:
- In case of direct investment, the foreign investors and the issuer of depositary receipts in a foreign country shall be allowed to open an indirect investment capital account at a custodian bank licensed for foreign exchange trading to perform investment activities or issue and cancel depositary receipts in accordance with the laws of Vietnam.
- In case of indirect investment in the form of capital trust, fund management companies or branches of foreign fund management companies in Vietnam shall be allowed to open indirect investment capital accounts in their names to receive capital from the foreign investors.
Thus, when directly performing investment activities, the foreign investors must choose and open an indirect investment capital account at a bank permitted to perform securities depository and foreign exchange trading as well. Otherwise, investing through capital trusts, a securities investment fund management company or the branch in Vietnam of a foreign fund management company shall open an indirect investment account at a bank allowed to implement for foreign exchange trading.
2. Obligations of the foreign investors
According to Article 5(1),circular 51, Foreign investors and their trading representatives must ensure that their securities transactions on Vietnam’s securities market and transactions conducted by affiliated persons or groups of affiliated foreign investors do not serve the purposes of creating artificial demand or supply, manipulating securities prices and conducting other prohibited transactions as prescribed by law.
The foreign investors and issuers of depositary receipts in foreign countries shall be obliged to declare, pay and finalize taxes, fees, charges and service prices related to securities trading activities in Vietnam in accordance with the laws of Vietnam.
In case of change of custodian bank, the foreign investors and issuer of depositary receipts in foreign countries must close their depository account at the current custodian bank after the entire balance on this depository account has been transferred to the depository account opened at the new custodian bank
In addition, the obligation of submitting reports on their ownership and disclosing information about securities transactions must be fulfilled by appointing 1 organization or 1 individual to submit reports periodically or on demand, applicable to the foreign investors, group of affiliated foreign investors that are related with each other in one of the following forms:
- Foreign funds or foreign organizations managed by the same domestic or foreign fund management company;
- Fund of funds or portfolios of the same fund, sub-funds of the same fund, or master-feeder funds;
- Investment portfolios of the same foreign investment fund, or foreign organizations under the management of the Multiple Investment Managers Fund (MIMF);
- Portfolios of the same foreign investment fund or of the same foreign investor, including those deposited on different depository accounts;
- The foreign funds or the foreign investors with the same trading representative.
3. Obligations of organizations providing securities services to the foreign investors
Circular 51 also stipulates that securities companies, fund management companies, branches of foreign fund management companies in Vietnam, and business entities with over 50% of charter capital held by the foreign investors must strictly comply with securities laws and related laws, specific regulations on foreign shareholdings in Vietnamese enterprises, distribute assets to each investor in a fair and reasonable manner.
When rendering services or participating in securities auctions with authorization of the foreign investors, securities companies, fund management companies, or branches of foreign fund management companies in Vietnam shall separate trading orders and investment directions of the foreign investors from those of domestic investors (if any) and their own trading orders.
When conducting transactions on behalf of the foreign investors, the trading representative of the foreign investors shall comply with trading and payment directions of the foreign investors, and avoid directly making investment decisions, including choosing securities type, quantity, price and time of trading, when they do not receive trading orders and investment directions from the foreign investors.
Circular 51 governing all foreign organizations and individuals operating on Vietnam’s securities market, has come into force since August 16th, 2021.
