Foreign investors will not be restricted in their ownership ratio in the securities investment fund

The Ministry of Finance has consulted the draft circular guiding the operation and management of securities investment funds.

Supervise assets of funds

The Draft Circular provides that securitiesinvestment funds includeprivate funds, closed-end funds, open-ended funds, Exchange-Trade Funds (ETF), and real estate investment funds.

The draft circular stipulates that real estate investment funds and securities investment companies must be managed by fund management companies; the operation of securities investment funds and securities investment companies are performed through fund management companies, exempting private securities investment companiesmanagingtheirown capital.

At the same time, assets of private funds, the private securities investment company must be deposited at a custodian bank. Assets of mutual funds, mutual securities investment company must be deposited at a supervisory bank. The management of capital and assets of a mutual fund or mutual securities investment company must be supervised by a supervisorybank.

The draft specifies that assets of the securities investment fund, securities investmentcompany owned by investors andshareholders are equivalent to the contributed capital ratio and are not assets of the fund management company, supervisorybank or custodian bank. The fund management company is only allowed to use the assets of the securities investment fund and the securities investment company to pay the payment obligations of the fund, the securities investment company, and is not allowed to pay or implement payment guaranteesfor the financial obligations of the fund management company, supervisory bank or any other organization or individual in any form and in all cases.

Notably, the Ministry of Finance stipulates that State authorities and units of Vietnamese people's armed forces are not allowed to contribute capital to establish securities investment funds, or securities investment companies; or buy fund certificates and shares of securities investment companies. The capital contribution to the establishment of funds, purchase of fund certificates by credit institutions, insurance companies, securities trading company and state-owned enterprises shall comply with relevant specialized laws. The fund management company and its related persons are allowed to participate in trading fund certificates managed by themselves if the fund's regulations allows .

The fund management company and related persons are allowed to participate in trading fund certificates managed by themselves if the fund's charter permits.

The draft circular also provides that foreign investors are not restricted in their ownership ratio in securities investment funds or securities investment companies. Exempting the open-ended fund and the exchange-trade fund, securities investment funds and securities investment companies with a foreign capital ownership ratio of 51% or more of their charter capital must register securities trading codes and be subject to the laws on ownership restrictions applicable to foreign investors.

Principle of fund's dividend payment

The draft regulates net asset value and asset transaction of the fund. Accordingly, the fund management company shall determine or authorize the custodian bank to determine the net asset value of the fund and the net asset value on a fund certificatemonthly.

In case of authorizingof authorizing a custodian bank to determine the net asset value, the fund management company must regularly inspect and supervise to ensure that the determination of net asset value is in accordance with the provisions of law and regulations in the fund’s charter and the net asset value are calculated accurately.

The fund management company must develop a valuation manual. The list of quotation organizations and valuation manuals must be approved by the Fund’s Board of Representatives.

Notably, on the distribution of profits, the Draft specifies thatthe fund must pay dividendsin cash or fund certificates, at least 15 days before distributing dividends, the fund management company must notify to the registered address of investor.

The fund's dividend payment ensures the principle that the dividends distributed to investors are taken from the source of profits in the period or accumulated profits after the fund has fulfilled all tax and financial obligations in accordance with the law.

In addition, the dividend payment must be in accordance with the fund's profit distribution policy and approved by the general meeting of investors. At the same time, the net asset value of the fund must not be less than VND50 billion after the dividend payment.

In case of dividend payment by fund certificates, the fund must have sufficient reciprocal capital from undistributed after-tax profits based on the latest audited or reviewed financial statements.