Does a securities investment fund management company operating in the form of a joint stock company need to establish an audit committee or an internal audit department?

Pursuant to Clause 1, Article 137 of the Law on Enterprises 2020 has the following regulations:

Organizational structure and management of joint stock companies

1. Unless otherwise prescribed by securities laws, a joint stock company has the right to choose a management organization and operate according to one of the following two models:

a) General Meeting of Shareholders, Board of Directors, Control Board and Director or General Director. In case a joint stock company has less than 11 shareholders and institutional shareholders own less than 50% of the company’s total shares, it is not required to c0

b) General Meeting of Shareholders, Board of Directors and Director or General Director. In this case, at least 20% of the members of the Board of Directors must be independent members and there must be an Audit Committee under the Board of Directors. The organizational structure, functions, and tasks of the Audit Committee are specified in the Company Charter or the operating regulations of the Audit Committee issued by the Board of Directors.

If the securities investment fund management company operates in the form of a joint stock company following the model of the General Meeting of Shareholders – Board of Directors – General Director, there must be an Audit Committee under the Board of Directors as prescribed in point b Clause 1 Article 137 Law on Enterprises 2020.

In addition, your company is a securities investment fund management company and must comply with relevant securities laws as follows:

At Clause 1 Article 5 Circular 99/2020/TT-BTC There are regulations that securities investment fund management companies are public companies or public fund managers, and public securities investment companies must establish an internal audit department. The internal audit department is directly under the Board of Directors.

According to the above regulations, if your company is a public company or public fund manager or public securities investment company, it must establish an Internal Audit Department under the Board of Directors according to the provisions of Circular 99/2020/TT-BTC.

If this is not the case, an Audit Committee must be established under the Board of Directors as prescribed in Point b, Clause 1, Article 137 of the Law on Enterprises 2020.

What is the responsibility of the internal audit department in a securities investment fund management company?

Pursuant to Clause 2, Article 5 of the Circular 99/2020/TT-BTC, the internal audit department in a securities investment fund management company has the following responsibilities:

– Check and evaluate the organizational structure, corporate governance activities, operating activities, and coordination of each department and each working position to prevent conflicts of interest and protect the rights of customers;

– Check and evaluate the completeness, effectiveness, efficiency, and level of compliance with the provisions of law and the provisions of the company’s Charter; internal control system; internal policies and processes, including rules of professional ethics, professional processes, risk management processes and systems, information technology systems, accounting, reporting processes and systems, information disclosure, processes for receiving and handling denunciations and complaints from customers and other internal regulations;

– Check validity, legality, honesty, level of caution, compliance with business processes and risk management;

– Perform operational audits according to the annual internal audit plan. The annual internal audit plan must be approved by the Board of Directors or the Board of Members or the company owner before implementation. The annual internal audit plan must ensure the following principles:

+ Internal audit is performed annually and unexpectedly;

+ Activities, processes, and departments must be assessed for risk according to the company’s internal regulations. Activities, processes, and departments with high levels of risk are focused on resources, prioritized for auditing first, and audited at least once a year;

+ The annual audit plan must be adjusted when there are changes in the risk level of activities, processes, and departments;

– Carry out audits of all operations of all departments in the company at least once every two years;

– Recommend solutions to improve the effectiveness and efficiency of the company’s operations; Monitor the results of implementing post-audit recommendations approved by the Board of Directors or Council of Members or company owners.

Where are employees of the internal audit department in a securities investment fund management company restricted from working?

Pursuant to Article 11 of Circular 99/2020/TT-BTC there are provisions as follows following:

Restrictions on activities of fund management companies and employees of fund management companies

1. The fund management company must not be related or have an ownership, borrowing or lending relationship with the custodian bank, depository bank of the securities investment fund, or securities investment company that the company is managing. Members of the Board of Directors or Members’ Council, employees of the internal audit department, the Board of Supervisors, the Chairman of the company, the Executive Board, and employees of the fund management company are not allowed to work in departments providing depository, supervision, and fund administration services at these banks and vice versa.

Thus, according to the above regulations, internal audit department employees in securities investment fund management companies are not allowed to work in departments providing depository, supervision, and fund administration services at these banks and vice versa.