Circular No. 105/2016/TT-BTC dated June 29, 2016 of the Ministry of Finance guiding offshore indirect investment activities of securities businesses, funds investing in securities, securities investment companies, insurance businesses

CIRCULAR

Guiding offshore indirect investment activities of securities trading institutions, securities investment funds, securities investment companies and insurance businesses[1]

Pursuant to the November 26, 2014 Law on Investment;

Pursuant to the June 29, 2006 Law on Securities;

Pursuant to the November 24, 2010 Law Amending and Supplementing a Number of Articles of the Securities Law;

Pursuant to the December 9, 2000 Law on Insurance Business;

Pursuant to the November 24, 2010 Law Amending and Supplementing a Number of Articles of the Law on Insurance Business;

Pursuant to December 13, 2005 Ordinance No. 28/2005/PL-UBTVQH on Foreign Exchange;

Pursuant to March 18, 2013 Ordinance No. 06/2013/PL-UBTVQH13 Amending and Supplementing a Number of Articles of the Ordinance on Foreign Exchange;

Pursuant to the Government’s Decree No. 215/2013/ND-CP of December 23, 2013, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

Pursuant to the Government’s Decree No. 135/2015/ND-CP of December 31, 2015, prescribing offshore indirect investment;

At the proposal of the Chairman of the State Securities Commission and the Director of the Insurance Supervisory Agency,

The Minister of Finance promulgates the Circular to guide offshore indirect investment activities of securities trading institutions, securities investment funds, securities investment companies and insurance businesses.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Circular prescribes offshore indirect investment dealing activities of securities trading institutions, securities investment funds, securities investment companies and insurance businesses, and offshore indirect investment entrustment undertaking activities of fund management companies.

Article 2. Subjects of application

This Circular applies to securities trading institutions, securities investment funds, securities investment companies, insurance businesses, and agencies, organizations and individuals involved in offshore indirect investment activities.

Article 3. Interpretation of terms

In addition to the terms interpreted in the Government’s Decree No. 135/2015/ND-CP of December 31, 2015, prescribing offshore indirect investment (below referred to as Decree No. 135/2015/ND-CP), in this Circular the terms below are construed as follows:

1. Securities trading institutions include securities companies and fund management companies established and operating in accordance with the Vietnamese law.

2. Insurance business means a life insurance business, non-life insurance business, health insurance business or reinsurance business.

3. Valid dossier means a dossier comprising all valid documents specified in this Circular and containing full information as prescribed by law.

4. Entrusting institution means an economic institution that makes offshore indirect investment by entrusting its foreign-currency capital to a fund management company licensed to undertake domestic investment entrustment for management.

Chapter II

PROCEDURES FOR GRANT AND REVOCATION OF OFFSHORE INDIRECT INVESTMENT REGISTRATION CERTIFICATES AND WRITTEN APPROVALS OF OFFSHORE INDIRECT INVESTMENT REGISTRATION

Section 1

SECURITIES TRADING INSTITUTIONS

Article 4. Procedures for grant of offshore indirect investment registration certificates

1. A dossier of application for an offshore indirect investment registration certificate of a securities trading institution must comprise:

a/ An application for an offshore indirect investment registration certificate, made according to the form provided in Appendix No. 01 to this Circular;

b/ The minutes of the meeting and resolution of the General Shareholders’ Meeting or Members’ Council or the decision of the owner approving the offshore indirect investment and its plan;

c/ The offshore indirect investment plan indicating the country in which investment is to be made, capital amount to be invested, source of investment capital, assets to be used for investment, expected investment results and other information;

d/ A tax agency’s written certification of the fulfillment of the financial obligation toward the Vietnamese State and no tax debt owed to the state budget by the time of submission of the dossier;

dd/ The internal process of offshore indirect investment, including mechanisms for internal control and audit, and identification and management of risks related to offshore indirect investment dealing activities;

e/ A written description of the physical and technical foundation of the securities trading institution, describing in detail the order transmission system and archive system serving offshore indirect investment activities;

g/ Copies of the chartered financial analyst (CFA) certificate, labor contract and financial analysis practice certificate (for securities companies) or fund management practice certificate (for fund management companies) of at least one (1) employee of the securities trading institution;

h/ A report on compliance with the regulations on management and use of state capital (for securities trading institutions owning state capital) in the year preceding the year of submission of the dossier.

2. A dossier prescribed in Clause 1 of this Article shall be made in one (1) set and submitted directly or by post to the State Securities Commission.

3. Within thirty (30) days after receiving a complete and valid dossier prescribed in Clauses 1 and 2 of this Article, the State Securities Commission shall grant an offshore indirect investment registration certificate to the securities trading institution, and concurrently send it to the State Bank of Vietnam. If refusing to grant a certificate, the State Securities Commission shall reply in writing, clearly stating the reason.

4. Within twenty four (24) hours after its offshore indirect investment registration certificate becomes effective, a securities trading institution shall publicize information on its website about such certificate.

Article 5. Procedures for revocation of offshore indirect investment registration certificates

1. In case a securities trading institution voluntarily requests revocation of its offshore indirect investment registration certificate, it shall make a dossier of request which must comprise:

a/ A written request for revocation of the offshore indirect investment registration certificate, made according to a form provided in Appendix 02 to this Circular;

b/ The minutes of the meeting and resolution of the General Shareholders’ Meeting or Members’ Council or a decision of the owner approving the termination of offshore indirect investment activities;

c/ A written explanation about the termination of offshore indirect investment activities, clearly stating the reason for termination, investment results, recoverability of investment capital, projected time of termination of investment activities, plan on liquidation of offshore indirect investments, and related matters;

d/ The original offshore indirect investment registration certificate.

2. A dossier prescribed in Clause 1 of this Article shall be made in one (1) set and submitted directly or by post to the State Securities Commission.

3. Within seven (7) working days after receiving a complete and valid dossier prescribed in Clauses 1 and 2 of this Article, the State Securities Commission shall issue and send a decision to revoke the offshore indirect investment registration certificate to the State Bank of Vietnam.

4. A securities trading institution may have its offshore indirect investment registration certificate revoked in the following cases:

a/ It no longer satisfies the condition prescribed at Point d, Clause 2, Article 14 of Decree No. 135/2015/ND-CP. Past thirty (30) days from the deadline prescribed by the current law for satisfying such condition, if it still fails to do so, the State Securities Commission shall issue and send a decision to revoke its offshore indirect investment registration certificate to the State Bank of Vietnam;

b/ Its dossier of application for an offshore indirect investment registration certificate contains untruthful information or it fails to maintain the conditions for being granted an establishment and operation license in accordance with the current law or becomes a subject specified in Clause 4, Article 2 of Decree No. 135/2015/ND-CP. Within thirty (30) days after the securities trading institution is subject to revocation of its offshore indirect investment registration certificate, the State Securities Commission shall issue and send a decision to revoke such certificate to the State Bank of Vietnam.

5. After the decision to revoke its offshore indirect investment registration certificate becomes effective, a securities trading institution shall:

a/ Publicize on its website information about such decision within subsequent twenty four (24) hours;

b/ Refrain from making more offshore indirect investment; refrain from renewing offshore indirect investments it has already made;

c/ Liquidate all of its offshore indirect investment (including also rights and benefits arising from such investments);

d/ For investments not yet fully liquidated, it shall send to the State Securities Commission liquidation reports, made according to the form provided in Appendix No. 9 or 10 to this Circular, every month until the liquidation of investments is completed.

Section 2

SECURITIES INVESTMENT FUNDS, SECURITIES INVESTMENT COMPANIES

Article 6. Procedures for permitting offshore indirect investment

1. A securities investment fund or securities investment company may, through a fund management company, submit a dossier of request for the State Securities Commission’s permission for offshore indirect investment. Such a dossier must comprise:

a/ A written request for permission for offshore indirect investment, made according to the form provided in Appendix 3 to this Circular;

b/ A copy of its charter which provides for offshore indirect investment;

c/ A copy of the on-principle depository contract between its Vietnam-based depository bank or supervisory bank and an overseas depository institution, enclosed with a copy of the securities depository operation registration certificate or an equivalent document of the overseas depository institution;

d/ Copies of the CFA certificate and labor contract of at least one (1) executive officer;

dd/ Documents specified at Points dd and e, Clause 1, Article 4 of this Circular.

2. A private securities investment company that self-manages its capital may submit a dossier of request for the State Securities Commission’s permission for offshore indirect investment registration. Such a dossier must comprise:

a/ The documents specified at Points a, b and c, Clause 1 of this Article;

b/ The internal process of offshore indirect investment, including mechanisms for internal control and internal audit, identification and management of risks related to offshore indirect investment;

c/ A written description of the physical and technical foundation of the securities investment company, describing in detail the order transmission system and archive system serving offshore indirect investment activities;

d/ Copies of the CFA certificate, fund management practice certificate and labor contract of at least one (1) employee of the securities investment company.

3. A dossier prescribed in Clause 1 or 2 of this Article shall be made in one (1) set and submitted directly or by post to the State Securities Commission.

4. Within thirty (30) days after receiving a complete and valid dossier prescribed in Clauses 1, 2 and 3 of this Article, the State Securities Commission shall issue a written permission for offshore indirect investment to the securities investment fund or securities investment company and concurrently send it to the State Bank of Vietnam. If refusing to issue a written permission, the State Securities Commission shall reply in writing, clearly stating the reason.

5. Within twenty four (24) hours after the securities investment fund or securities investment company is permitted to make offshore indirect investment, a fund management company or private securities investment company that self-manages its capital shall publicize on its website information about the State Securities Commission’s permission for offshore indirect investment.

Article 7. Procedures for terminating offshore indirect investment

1. In case a securities investment fund or securities investment company voluntarily terminates its offshore indirect investment, it shall make a dossier of request for termination of offshore indirect investment which must comprise:

a/ A written request for termination of offshore indirect investment, made according to the form provided in Appendix 04 to this Circular;

b/ The minutes of the meeting and resolution of the Investors’ General Meeting or Members General Meeting or Shareholders General Meeting on termination of offshore indirect investment;

c/ A written explanation about the termination of offshore indirect investment, clearly stating the reason for termination, investment results, recoverability of investment capital, projected time limit for investment termination, plan on liquidation of offshore indirect investments and related matters.

2. A dossier prescribed in Clause 1 of this Article shall be made in one (1) set and submitted directly or by post to the State Securities Commission.

3. Within seven (7) working days after receiving a complete and valid dossier prescribed in Clauses 1 and 2 of this Article, the State Securities Commission shall issue a document permitting the termination of offshore indirect investment by the securities investment fund or securities investment company and concurrently send it to the State Bank of Vietnam.

4. A securities investment fund or securities investment company shall be forced to terminate its offshore indirect investment in the following cases:

a/ The fund management company managing the securities investment fund or securities investment company that makes offshore indirect investment no longer satisfies the condition prescribed at Point d, Clause 2, Article 14 of Decree No. 135/2015/ND-CP.  Past thirty (30) days after the expiration of the time limit for satisfaction of the condition prescribed by the current law, if the fund management company still fails to satisfy the condition prescribed at Point d, Clause 2, Article 14 of Decree No. 135/2015/ND-CP, the State Securities Commission shall issue a document to terminate the offshore indirect investment by the securities investment fund or securities investment company, and concurrently send it to the State Bank of Vietnam;

b/ The dossier of request for permission for registration of offshore indirect investment of the securities investment fund or securities investment company contains untruthful information or the securities investment company fails to maintain the conditions for being granted an establishment and operation license in accordance with current laws or becomes a subject specified in Clause 4, Article 2 of Decree No. 135/2015/ND-CP. Within thirty (30) days after the securities investment fund or securities investment company is forced to terminate its offshore indirect investment, the State Securities Commission shall issue a document to terminate the offshore indirect investment, and concurrently send it to the State Bank of Vietnam.

5. After the termination of offshore indirect investment of a securities investment fund or securities investment company takes effect under a document of the State Securities Commission, the fund management company or private securities investment company that self-manages its capital shall:

a/ Publicize on its website within subsequent twenty four (24) hours information about the termination of the offshore indirect investment by the securities investment fund or securities investment company;

b/ Refrain from making new offshore indirect investments and renewing offshore indirect investments already made;

c/ Liquidate offshore indirect investments (including also rights and benefits arising from such investments);

d/ For investments not yet fully liquidated, it shall send to the State Securities Commission reports on liquidation of offshore indirect investments of the securities investment fund or securities investment company, made according to the form provided in Appendix 13 to this Circular, every month until the liquidation is completed.

Section 3

INSURANCE BUSINESSES

Article 8. Procedures for grant of offshore indirect investment registration certificates

1. A dossier of application for an offshore indirect investment registration certificate of an insurance business must comprise:

a/ An application for an offshore indirect investment registration certificate, made according to the form provided in Appendix 05 to this Circular;

b/ A document of an authority defined in the charter of the insurance business approving the offshore indirect investment activities of the business;

c/ The offshore indirect investment plan, indicating the country in which investment is to be made, capital amount to be invested, source of investment capital, assets to be used for investment, expected investment results and other information;

d/ A tax agency’s written certification of the fulfillment of the financial obligation toward the Vietnamese State and no tax debt owed to the state budget by the time of submission of the dossier;

dd/ The internal process of offshore indirect investment, including mechanisms for internal control and audit, and identification and management of risks related to offshore indirect investment dealing activities;

e/ A written description of the physical and technical foundation to serve offshore indirect investment activities;

g/ Copies of the chartered financial analyst (CFA) certificate and labor contract of at least one (1) employee directly carrying out investment activities of the business;

h/ A report on compliance with the regulations on management and use of state capital (for insurance businesses owning state capital in accordance with the Law on Management and Use of State Capital invested in the production and business activities of the business) in the year preceding the year of submission of the dossier.

2. A dossier prescribed in Clause 1 of this Article shall be made in one (1) set and submitted directly or by post to the Ministry of Finance.

3. Within thirty (30) days after receiving a complete and valid dossier prescribed in Clauses 1 and 2 of this Article, the Ministry of Finance shall grant an offshore indirect investment registration certificate to the insurance business, and concurrently send it to the State Bank of Vietnam. If refusing to grant a certificate, the Ministry of Finance shall reply in writing, clearly stating the reason.

4. Within twenty four (24) hours after its offshore indirect investment registration certificate becomes effective, an insurance business shall publicize information about such certificate on its website.

Article 9. Procedures for revocation of offshore indirect investment registration certificates

1. In case an insurance business voluntarily requests revocation of its offshore indirect investment registration certificate, it shall make a dossier of request which must comprise:

a/ A written request for revocation of the offshore indirect investment registration certificate, made according to the form provided in Appendix 06 to this Circular;

b/ A document of an authority defined in the charter of the insurance business approving the termination of offshore indirect investment activities;

c/ A written explanation about the termination of offshore indirect investment activities, clearly stating the reason for termination, investment results, recoverability of investment capital, projected time of termination of investment activities, plan on liquidation of offshore indirect investments and related matters;

d/ The original offshore indirect investment registration certificate.

2. A dossier prescribed in Clause 1 of this Article shall be made in one (1) set and submitted directly or by post to the Ministry of Finance.

3. Within seven (7) working days after receiving a complete and valid dossier prescribed in Clauses 1 and 2 of this Article, the Ministry of Finance shall issue and send a decision to revoke the offshore indirect investment registration certificate to the State Bank of Vietnam.

4. An insurance business may have its offshore indirect investment registration certificate revoked in the following cases:

a/ It no longer satisfies the condition prescribed at Point d, Clause 2, Article 14 of Decree No. 135/2015/ND-CP. Past thirty (30) days from the deadline prescribed by the current law for satisfying such condition, if it still fails to do so, the Ministry of Finance shall issue and send a decision to revoke its offshore indirect investment registration certificate to the State Bank of Vietnam;

b/ Its dossier of application for the offshore indirect investment registration certificate contains untruthful information which directly affects the issuance of a decision by the Ministry of Finance or it becomes a subject specified in Clause 4, Article 2 of Decree No. 135/2015/ND-CP. Within thirty (30) days after the insurance business is subject to revocation of its offshore indirect investment registration certificate, the Ministry of Finance shall issue and send a decision to revoke such certificate to the State Bank of Vietnam.

5. After the decision to revoke its offshore indirect investment registration certificate becomes effective, an insurance business shall:

a/ Publicize on its website information about such decision within subsequent twenty four (24) hours;

b/ Refrain from making more offshore indirect investments; refrain from renewing offshore indirect investments it has already made;

c/ Liquidate all of its offshore indirect investments (including also rights and benefits arising from such investments) within one (1) year after the revocation decision becomes effective;

d/ For investments not yet fully liquidated, it shall send to the Ministry of Finance liquidation reports, made according to the form provided in Appendix No. 14 to this Circular, every month until the liquidation of investments is completed.

Chapter III

PROCEDURES FOR GRANT AND REVOCATION OF OFFSHORE INDIRECT ENTRUSTMENT UNDERTAKING REGISTRATION CERTIFICATES TO/OF FUND MANAGEMENT COMPANIES

Article 10. Procedures for grant of offshore indirect investment entrustment undertaking registration certificates to fund management companies

1. A dossier of application for an offshore indirect investment entrustment undertaking registration certificate of a fund management company must comprise:

a/ An application for an offshore indirect investment entrustment undertaking registration certificate, made according to the form provided in Appendix 07 to this Circular;

b/ The internal process of offshore indirect investment entrustment undertaking, including the identification and management of risks related to offshore indirect investment entrustment undertaking activities;

c/ The documents specified at Points d, e and g, Clause 1, Article 4 of this Circular.

2. A dossier prescribed in Clause 1 of this Article shall be made in one (1) set and submitted directly or by post to the State Securities Commission.

3. Within thirty (30) days after receiving a complete and valid dossier prescribed in Clauses 1 and 2 of this Article, the State Securities Commission shall grant an offshore indirect investment entrustment undertaking registration certificate to the fund management company, and concurrently send it to the State Bank of Vietnam. If refusing to grant a certificate, the State Securities Commission shall reply in writing, clearly stating the reason.

4. Within twenty four (24) hours after its offshore indirect investment entrustment undertaking registration certificate becomes effective, a fund management company shall publicize information about such certificate on its website.

Article 11. Procedures for revocation of offshore indirect investment entrustment undertaking registration certificates

1. In case a fund management company voluntarily requests revocation of its offshore indirect investment registration certificate, it shall make a dossier of request which must comprise:

a/ A written request for revocation of the offshore indirect investment entrustment undertaking registration certificate, made according to the form provided in Appendix 08 to this Circular;

b/ The minutes of the meeting and resolution of the General Shareholders’ Meeting or Members’ Council or a decision of the owner approving the termination of offshore indirect investment entrustment undertaking activities;

c/ A written explanation about the termination of offshore indirect investment entrustment undertaking activities, clearly stating the reason for termination, investment results, recoverability of investment capital, projected time of termination of investment entrustment undertaking activities, plan on liquidation of offshore indirect investment entrustment contracts and related matters;

d/ The original offshore indirect investment entrustment undertaking registration certificate.

2. A dossier prescribed in Clause 1 of this Article shall be made in one (1) set and submitted directly or by post to the State Securities Commission.

3. Within seven (7) working days after receiving a complete and valid dossier prescribed in Clauses 1 and 2 of this Article, the State Securities Commission shall issue and send a decision to revoke the offshore indirect investment entrustment undertaking registration certificate to the State Bank of Vietnam.

4. A fund management company may have its offshore indirect investment entrustment undertaking registration certificate revoked in the following cases:

a/ It no longer satisfies the condition prescribed at Point e, Clause 2, Article 23 of Decree No. 135/2015/ND-CP. Past thirty (30) days from the deadline prescribed by the current law for satisfying such condition, if it still fails to do so, the State Securities Commission shall issue and send a decision to revoke its offshore indirect investment entrustment undertaking registration certificate to the State Bank of Vietnam.

After it no longer satisfies the condition prescribed at Point e, Clause 2, Article 23 of Decree No. 135/2015/ND-CP, a fund management company may neither extend existing offshore indirect investment entrustment contracts nor enter into new ones.

b/ Its dossier of application for the offshore indirect investment entrustment undertaking registration certificate contains untruthful information or it fails to maintain the conditions for being granted an establishment and operation license in accordance with the current law. Within thirty (30) days after the fund management company is subject to revocation of its offshore indirect investment entrustment undertaking registration certificate, the State Securities Commission shall issue and send a decision to revoke such certificate to the State Bank of Vietnam.

5. After the decision to revoke its offshore indirect investment entrustment undertaking registration certificate becomes effective, a fund management company shall:

a/ Publicize on its website information about such decision within subsequent twenty four (24) hours;

b/ Refrain from extending existing offshore indirect investment entrustment contracts or entering into new ones (applicable to the case specified in Clause 1 or Point b, Clause 4 of this Article);

c/ Terminate asset transactions and management overseas, except transactions conducted for the purpose of liquidating investment portfolios of entrusting clients;

d/ Liquidate its investment entrustment contracts and investment portfolio accounts (account closure or transfer), and transfer the whole money and securities balance at the request of clients or hand over the responsibility to the replacing fund management company which has an offshore indirect investment entrustment undertaking registration certificate;

dd/ For investment entrustment contracts not yet fully liquidated, it shall send to the State Securities Commission liquidation reports, made according to the form provided in Appendix No. 12 to this Circular, every month until the liquidation of such contracts is completed.

Chapter IV

OFFSHORE INDIRECT INVESTMENT ACTIVITIES

Section 1

OFFSHORE INDIRECT INVESTMENT DEALING

Article 12. General provisions on offshore indirect investment dealing

1. Insurance businesses, securities trading institutions, securities investment funds and securities investment companies may make offshore indirect investment in accordance with the investment and banking laws after they are granted offshore indirect investment registration certificates or written permissions for offshore indirect investment by the Ministry of Finance or State Securities Commission or written certifications of registered dealing limits by the State Bank of Vietnam.

2. Securities trading institutions, securities investment funds, securities investment companies and insurance businesses shall register their offshore indirect investment dealing limits under regulations of the State Bank of Vietnam.

3. Foreign-invested dealing institutions (as defined in Clause 1, Article 23 of the Investment Law) may not make offshore indirect investment.

4. Dealing institutions that have valid offshore indirect investment registration certificates may not entrust offshore indirect investment to entrustment undertaking institutions.

5. Fund management companies may enter into depository contracts and supervision contracts with Vietnam-based depository banks and supervisory banks to deposit and supervise assets of securities investment funds and securities investment companies. Vietnam-based depository banks and supervisory banks of securities investment funds and securities investment companies may authorize overseas depository institutions to deposit offshore indirect investment assets of securities investment funds and securities investment companies.

6. Depository authorization prescribed in Clause 5 of this Article must comply with the following provisions:

a/ It is provided for in the charters of securities investment funds and securities investment companies and complies with relevant regulations;

b/ It is conducted on the basis of authorization contracts between Vietnam-based depository banks or supervisory banks and overseas depository institutions. Authorization contracts must identify rights, obligations and responsibilities of Vietnam-based depository banks or supervisory banks and overseas depository institutions and comply with relevant regulations;

c/ Vietnam-based depository banks and supervisory banks shall take full responsibility for, and inspect, supervise and assess, authorized depository activities;

d/ Vietnam-based depository banks and supervisory banks shall ensure that overseas deposited assets have been registered under the ownership of securities investment funds and securities investment companies to which these banks provide services;

dd/ Fund management companies and Vietnam-based depository banks and supervisory banks must have sufficient information about all overseas deposited assets under the ownership of securities investment funds and securities investment companies;

e/ Vietnam-based depository banks and supervisory banks shall comply with the regulations on asset depository and supervision applicable to the establishment and management of securities investment funds and establishment, organization of operation and management of securities investment companies, and with relevant regulations.

7. Insurance businesses may enter into depository contracts with overseas depository institutions licensed to provide depository services in accordance with foreign laws.

Insurance businesses may enter into contracts with Vietnam-based depository banks to deposit their offshore indirect investment assets. Vietnam-based depository banks may authorize overseas depository institutions to deposit offshore indirect investment assets of insurance businesses and shall take full responsibility for authorized depository activities.

8. Within five (5) working days after entering into a depository contract or a depository authorization contract with an overseas depository institution or after changing the overseas depository institution:

a/ The insurance business shall send to the Ministry of Finance a notice of the entry into the depository contract or depository authorization contract enclosed with a copy of the securities depository operation registration certificate or an equivalent document of the overseas depository institution;

b/ The Vietnam-based depository bank or supervisory bank of the securities investment fund or securities investment company shall send to the State Securities Commission a notice of the entry into the depository authorization contract enclosed with a copy of the securities depository operation registration certificate or an equivalent document of the overseas depository institution.

Article 13. Safe investment ratio of securities companies

1. Only securities companies licensed to conduct securities dealing may make or entrust offshore indirect investment (excluding the case specified in Clause 4, Article 19 of Decree No. 135/2015/ND-CP). Indirect investment shall be conducted by securities companies or their overseas branches.

2. A securities company mentioned in Clause 1 of this Article may invest or entrust investment in investment tools prescribed by the State Bank of Vietnam, provided that:

a/ Its investment amount does not exceed its registered dealing limit as certified by the State Bank of Vietnam;

b/ In case a new offshore indirect investment amount arises, the total offshore indirect investment or entrusted offshore indirect investment must not exceed thirty percent (30%) of the equity capital stated in the audited or examined financial statement nearest to the time of investment and the investment limitations and ratios prescribed by the regulations guiding the establishment and operation of securities companies applicable to both domestic and foreign investment.

Article 14. Safe investment ratio of fund management companies   

1. A fund management company may invest up to twenty percent (20%) of its equity capital stated in the latest audited annual financial statement or latest examined biannual financial statement and the latest quarterly financial statement and within its registered dealing limit as certified by the State Bank of Vietnam in investment tools prescribed by the State Bank of Vietnam.

2. In case the investment portfolio of a fund management company exceeds the limit prescribed in Clause 1 of this Article due to changes in market prices of assets which it is holding or its enjoyment of rights related to assets which it is holding, it shall take necessary measures to adjust the investment to comply with the investment limit prescribed in Clause 1 of this Article within three (3) months after making an excessive investment.

3. When making offshore indirect investment, fund management companies shall comply with the provisions on financial investment of the law on establishment, organization and operation of fund management companies.

Article 15. Safe investment ratio of securities investment funds and securities investment companies

1. A securities investment fund or securities investment company may only make offshore indirect investment in investment tools in accordance with its charter and regulations of the State Bank of Vietnam.

2. A securities investment fund or securities investment companies may invest up to twenty percent (20%) of its net asset value stated in the latest investment report and within its registered dealing limit as certified by the State Bank of Vietnam.

3. The offshore indirect investment structure and limits and adjustment of these limits of securities investment funds and securities investment companies must comply with the provisions on investment structure and limits and adjustment of investment limits of the laws on establishment and management of securities investment funds and on establishment, organization of operation and management of securities investment companies.

Article 16. Safe investment ratio of insurance businesses

1. An insurance business may make offshore indirect investment from its equity capital in accordance with law.

In any circumstance, the total offshore indirect investment amount must not exceed the value determined to be equal to the equity capital minus:

- The legal capital or minimum solvency margin, whichever is larger; and

- The offshore direct investment amount already made (if any).

2. An insurance business may deal in investment tools prescribed by the State Bank of Vietnam within 5% of the total outstanding securities amount of an overseas institution (except foreign government bonds) and within its registered dealing limit certified by the State Bank of Vietnam.

3. Every quarter, depending on its financial status, an insurance business shall re-appraise its offshore indirect investment activities. In case the investment ratio of an insurance business does not satisfy the conditions prescribed in Clauses 1 and 2 of this Article, the business shall take necessary measures to comply with the prescribed investment limit within three (3) months after the end of the quarter.

Section 2

OFFSHORE INDIRECT INVESTMENT ENTRUSTMENT UNDERTAKING

Article 17. General provisions on offshore indirect investment entrustment undertaking

1. Fund management companies shall register their offshore indirect investment entrustment undertaking limits under regulations of the State Bank of Vietnam.

2. A fund management company may undertake offshore indirect investment entrustment in accordance with the investment and banking laws after obtaining an offshore indirect investment entrustment undertaking registration certificate from the State Securities Commission and a written certification of entrustment undertaking limit registration from the State Bank of Vietnam. 

3. When undertaking offshore indirect investment entrustment, a fund management company and an entrusting institution shall make a contract separately from the domestic investment entrustment contract. The fund management company shall ensure that the entrusting institution satisfies the conditions prescribed in Article 20 of Decree No. 135/2015/ND-CP.

An investment entrustment contract must state the entrusted money amount, entrustment duration, investment tool, and rights and obligations of contracting parties, and comply with current regulations. Such a contract must clearly state the contract liquidation deadline when the fund management company has its offshore indirect investment entrustment undertaking registration certificate revoked.

4. Entrusting institutions must satisfy the condition on offshore indirect investment capital sources prescribed in Article 10 of Decree No. 135/2015/ND-CP and take responsibility for risks against capital amounts which they have entrusted for offshore indirect investment.

5. Entrusting institutions and fund management companies shall comply with Articles 19 and 22 of Decree No. 135/2015/ND-CP.

6. Fund management companies shall enter into depository contracts with overseas depository institutions licensed to provide depository services in accordance with foreign laws.

Fund management companies may enter into contracts with Vietnam-based depository banks for depositing of offshore indirect investment assets of entrusting institutions. Vietnam-based depository banks may authorize overseas depository institutions to keep in depository offshore indirect investment assets of entrusting institutions and shall take full responsibility for authorized depository activities.

7. Within five (5) working days after a fund management company enters into a depository contract with an overseas depository institution or a Vietnam-based depository bank enters into a depository authorization contract with an overseas depository institution, or after the overseas depository institution is changed, a fund management company shall notify such to the State Securities Commission and send to the latter the depository contract or depository entrustment contract and a copy of the securities depository operation registration certificate or an equivalent document of the overseas depository institution.

8. Offshore indirect investment asset depository and depository entrustment must comply with the regulations on establishment, organization and operation of fund management companies and relevant regulations.

Chapter V

INFORMATION PROVISION AND REPORTING OBLIGATION

Article 18. Provision of information by fund management companies 

1. A fund management company shall provide investors with its prospectus or summarized prospectus which contains information on risks of securities investment funds and securities investment companies when conducting offshore indirect investment, responsibility of the Vietnam-based depository bank or supervisory bank for offshore indirect investment activities, offshore indirect investment portfolios and structures of securities investment funds and securities investment companies.

2. At the request of an entrusting institution, a fund management company shall provide its process of risk management, clearly stating investment limitations and the risk prevention and management method to be used by the company to manage assets of the overseas entrusting institution.

3. For entrusting institutions, fund management companies shall:

a/ Provide depository contracts and documents attached to offshore indirect investment entrustment contracts;

b/ Report on a monthly basis on investment portfolios in accordance with the regulations on establishment, organization and operation of fund management companies;

c/ Provide statements of investment portfolio accounts and transactions certified by depository institutions and information about investment management, and answer all inquiries of clients.

4. If requested, a fund management company shall provide the State Securities Commission with the investment entrustment contract enclosed with documents related to the investment entrusting institution as follows:

a/ Copies of audited financial statements for five (5) consecutive years prior to the year of offshore indirect investment entrustment as prescribed in Clause 1, Article 20 of Decree No. 135/2015/ND-CP;

b/ A tax agency’s written certification of the fulfillment of its financial obligation toward the Vietnamese State and no tax debt owed to the state budget by the time of offshore indirect investment entrustment;

c/ Document proving that the foreign-currency amount on the account for offshore indirect investment entrustment is from a self-acquired source;

d/ An offshore indirect investment plan approved by a competent body of the investment entrusting institution (the Shareholders’ General Meeting, Board of Directors, Members’ Council or an equivalent body) or by another authority in accordance with law;

dd/ A report on compliance with the regulations on management and use of state capital (for entrusting institution owning state capital) in the year preceding the year of offshore indirect investment entrustment.

Article 19. Reporting obligation          

1. The reporting obligation of securities companies:

a/ Within three (3) working days after having its offshore indirect investment dealing limit registration certified in writing by the State Bank of Vietnam, a securities company shall send to the State Securities Commission a report on such limit enclosed with a copy of the State Bank of Vietnam’s written certification;

b/ A securities company shall send to the State Securities Commission monthly reports on its offshore indirect investment dealing activities, made according to the form provided in Appendix 09 to this Circular. The deadline for sending a month’s report is the 10^th day of the subsequent month.

2. The reporting obligation of fund management companies:

a/ Within three (3) working days after having its offshore indirect investment dealing or entrustment undertaking limit registration certified by the State Bank of Vietnam, a fund management company shall send to the State Securities Commission a report on its offshore indirect investment dealing or entrustment undertaking limit enclosed with a copy of the State Bank of Vietnam’s written certification of such limit registration;

b/ A fund management company shall send to the State Securities Commission monthly reports on its offshore indirect investment dealing activities, made according to the form provided in Appendix 10 to this Circular, or  monthly reports on the observance of its offshore indirect investment entrustment undertaking limit, made according to the form provided in Appendix 11 to this Circular, or monthly reports on management of offshore indirect investment portfolios of entrusting institutions, made according to the form provided in Appendix 12 to this Circular. The deadline for sending a month’s report is the 10^th day of the subsequent month.

3. The reporting obligation of securities investment funds and securities investment companies

a/ Within three (3) working days after having its offshore indirect investment dealing limit registration certified in writing by the State Bank of Vietnam, a securities investment fund or securities investment company shall, through a fund management company or private securities investment company that self-manages its capital, send to the State Securities Commission a report on such limit enclosed with a copy of the State Bank of Vietnam’s written certification;

b/ A securities investment fund or securities investment company shall, through a fund management company or private securities investment company that self-manages its capital, send to the State Securities Commission monthly reports on its offshore indirect investment dealing activities, made according to the form provided in Appendix 13 to this Circular. The deadline for sending a month’s report is the 10^th day of the subsequent month.

4. The reporting obligation of insurance businesses:

a/ Within three (3) working days after having its offshore indirect investment dealing limit registration certified in writing by the State Bank of Vietnam, an insurance business shall send to the State Securities Commission a report on such limit enclosed with a copy of the State Bank of Vietnam’s written certification;

b/ An insurance business shall send to the State Securities Commission quarterly reports on its offshore indirect investment dealing activities, made according to the form provided in Appendix 14 to this Circular. The deadline for sending a quarter’s report is the 30^th day of the subsequent quarter.

5. The reporting obligation of Vietnam-based supervisory banks:

Vietnam-based supervisory banks shall send to the State Securities Commission their reports on supervision of offshore indirect investment activities of securities investment funds and securities investment companies in accordance with the regulations on establishment and management of securities investment funds and on establishment, operation organization and management of securities investment companies.

6. Securities trading institutions and insurance businesses in which the State holds at least sixty five percent (65%) of charter capital and which make offshore indirect investment under approved plans shall report to a competent state management agency within twenty four (24) hours after receiving the Prime Minister’s permission for offshore indirect investment under Article 9 of Decree No. 135/2015/ND-CP.

7. Within five (5) working days after modifying or supplementing its internal process of offshore indirect investment, a securities trading institution, a securities investment company or an insurance business shall send a copy of the modified or supplemented internal process to a competent state management agency.

Chapter VI

ORGANIZATION OF IMPLEMENTATION

Article 20. Implementation provisions  

This Circular takes effect on August 15, 2016.

Article 21. Organization of implementation 

1. The Ministry of Finance, the State Securities Commission, securities trading institutions, securities investment funds, securities investment companies, insurance businesses and related institutions and individuals shall organize the implementation of this Circular.

2. The revision of this Circular shall be decided by the Minister of Finance.

For the Minister of Finance
Deputy Minister
TRAN XUAN HA

* All appendices to this Circular are not translated