Legal updates: New rules for foreign securities investors and fund management fund

Regulation greases path for foreign securities investors

Circular No 213/2012/TT-BTC has been issued by the Ministry of Finance to regulate the participation of foreign investors in the securities market.

Under the circular, it will be easier for foreign investors to open securities trading accounts. Individual foreign investors will no longer be required to submit judicial background records, only a notarized copy of a valid passport or other identification. Documents which are granted by the authorities in the investor’s country of origin can be notarized and certified under foreign law and given consular certification under Vietnamese law.

Circular No 213 will also shorten the time needed for securities trading codes to be issued. The Vietnam Securities Depository Centre will grant securities trading codes within five days for institutional investors and three days for individual investors from the date of completely receipt dossiers.

The Circular also stipulates that codes may be still granted to foreign investors with insufficient documentation, and the codes will remain active for up to nine months until the foreign investor can submit the documents needed to complete their dossiers. To increase the transparency of the domestic stock market, the circular also includes provisions on disclosure requirements for foreign investors. The Circular takes effect on 15 February 15, replacing Decision No 121/2008/QD-BTC of December 2008.

New provisions on foreign-invested fund management firms

Decree No 58/2012/ND-CP issued last July has helped pave the way for incorporation of wholly foreign invested securities companies, including fund management companies.

Circular No 212/2012/TT-BTC, issued by the Ministry of Finance on December 5, elaborates on the provisions of the decree relating to fund management companies. Under Circular No 212, the qualifications and financial requirements for foreign investors to incorporate a fund management company remain the same as regulated under Decree No 58.

The application for a license to establish such a company, either domestic or foreign-invested, would be required to include: (i) an application form; (ii) minutes and resolution of a meeting of shareholders or stakeholders approving the establishment of the fund management company; (iii) a proposed charter for the company; (iv) a memorandum of understanding for the leasing of a head office; (v) a business plan for first three years; (vi) documentary evidence of the financial capacity of investors; and (v) a list in statutory form of all the shareholders, board of management and control board members, and principal management staff.

Within 20 days upon the submission of the application, the State Securities Commission will be required to issue a notice in lieu of the "in-principal approval" provided for under Decision 35/2007/QD-BTC. The applicant would have three months to correct any deficiencies in the application dossier. Thereafter, the commission would issue the license with seven days. Circular No 212 takes effect on March 1 and replaces Decision No 35/2007/QD-BTC and Decision No 125/2008/QD-BTC.