Restrictions and Obligations of Securities Investment Fund Management Companies in Vietnam

Short answer: A transfer of shares in a securities investment fund management company does not require an approval decision from the State Securities Commission of Vietnam. What obligations and restrictions apply to fund management companies? ANT Legal’s lawyers explain below.

1. What are the obligations of a securities investment fund management company?

Article 90 of the Law on Securities 2019 (as amended and supplemented by Law No. 56/2024/QH15) sets out the obligations of securities investment fund management companies and branches of foreign fund management companies in Vietnam as follows:

• Comply with the obligations prescribed in Clauses 1, 2, 4, 5, 6, 7, 8, 9, 10 and 12 of Article 89 of this Law.
• Carry out fund management activities for securities investment funds and portfolio management in accordance with this Law, the fund’s charter, the contract signed with entrusting investment clients, and the contract signed with the supervisory bank.
• Determine the net asset value of securities investment funds in accordance with Article 106 of this Law, the fund’s charter, and the contract signed with entrusting investment clients.
• When managing entrusted assets, the securities investment fund management company must hold all entrusted assets in custody, ensuring the principles of independence and segregation down to each entrusting client, and segregating entrusted assets from the fund management company’s own assets.

2. What restrictions apply to a securities investment fund management company?

Article 91 of the Law on Securities 2019 (as amended and supplemented by Law No. 56/2024/QH15) sets out restrictions applicable to securities companies, securities investment fund management companies, and branches of foreign securities companies and fund management companies in Vietnam as follows:

• They must not make statements or guarantees to clients regarding the level of income or profit achievable on their investment, or guarantee that clients will not suffer losses, except in the case of investments in fixed-income securities.
• They must not disclose client information, except with the client’s consent or at the request of a competent authority.
• They must not engage in conduct that misleads clients and investors regarding the price of securities.
• Founding shareholders and capital-contributing members at establishment of a securities company or securities investment fund management company must not transfer their shares or capital contributions within 03 years from the date of license issuance, except for transfers among founding shareholders or capital-contributing members at establishment of the company.
• Securities companies, securities investment fund management companies, and branches of foreign securities companies and fund management companies in Vietnam must conduct business and provide securities services under their own names; they must not use the name of another organization or individual, or allow another organization or individual to use their name, to conduct business or provide securities services.
• A securities company must not contribute capital to establish, or purchase shares or capital contributions of, another securities company in Vietnam, except in the following cases:
  • Purchase for the purpose of consolidation or merger;
  • Purchase to own, or together with related persons (if any) to own, no more than 5% of the outstanding voting shares of a listed or registered-for-trading securities company.
• A securities investment fund management company must not contribute capital to establish, or purchase shares or capital contributions of, another securities investment fund management company in Vietnam, except in the following cases:
  • Purchase for the purpose of consolidation or merger;
  • Purchase to own, or together with related persons (if any) to own, no more than 5% of the outstanding voting shares of a listed or registered-for-trading securities investment fund management company.

3. Does a transfer of shares in a fund management company require an approval decision from the State Securities Commission of Vietnam?

Article 87 of the Law on Securities 2019 (as amended and supplemented by Law No. 56/2024/QH15) prescribes the activities requiring approval from the State Securities Commission of Vietnam as follows:

“Article 87. Activities requiring approval from the State Securities Commission of Vietnam

1. Securities companies and securities investment fund management companies must obtain written approval from the State Securities Commission of Vietnam before carrying out the following activities:

a) Temporary suspension of operations, except for suspension due to force majeure;

b) Offering and listing securities of the securities company or securities investment fund management company overseas;

c) Offshore indirect investment;

d) Establishing or closing branches or representative offices domestically and overseas; establishing subsidiaries overseas; changing business lines at branches; establishing or closing transaction offices;

đ) Changing the name or location of branches, representative offices, or transaction offices;

e) Providing services specified at Point b, Clause 1, Article 86 of this Law.

2. Branches of foreign securities companies and fund management companies in Vietnam, when temporarily suspending operations as prescribed at Point a, Clause 1 of this Article, must obtain written approval from the State Securities Commission of Vietnam before doing so.

3. The Government shall provide detailed regulations on the conditions, dossiers, order, and procedures for approval of the activities prescribed in this Article.”

Accordingly, securities companies and securities investment fund management companies must obtain written approval from the State Securities Commission of Vietnam before carrying out the following activities:

• Temporary suspension of operations, except for suspension due to force majeure;
• Offering and listing securities of the securities company or securities investment fund management company overseas;
• Offshore indirect investment;
• Establishing or closing branches or representative offices domestically and overseas; establishing subsidiaries overseas; changing business lines at branches; establishing or closing transaction offices;
• Changing the name or location of branches, representative offices, or transaction offices;
• Providing services specified at Point b, Clause 1, Article 86 of this Law.

Therefore, a transfer of shares in a fund management company does not fall within the above activities and does not require approval from the State Securities Commission of Vietnam.