For what purposes is a securities investment fund management company allowed to invest in derivative securities according to regulations?

For what purpose is a securities investment fund management company allowed to invest in derivative securities?

Securities investment fund management companies are allowed to invest in derivative securities for the purposes specified in Point b, Clause 1, Article 16 of Decree 158/2020/ND-CP as follows:

Invest in derivative securities

1. Organizations and individuals are allowed to invest in derivatives on the derivatives market, except in cases where they are prohibited by competent authorities from conducting securities and stock market activities for a limited or permanent period due to violations in securities and stock market activities and investment cases with the following specific conditions:

a) Securities companies are only allowed to invest in derivative securities after being granted a Certificate of eligibility for derivative securities trading by the State Securities Commission, allowing them to conduct self-trading activities in derivative securities;

b) Fund management companies are only allowed to invest in derivative securities for the purpose of hedging risks for the securities portfolio currently held with respect to entrusted capital from investment portfolio management activities; Fund management companies are only allowed to invest in derivative securities for the purpose of preventing risks according to the provisions of law on securities investment funds for capital sources of securities investment funds and securities investment companies. Fund management companies are not allowed to invest in derivative securities from their own capital, loan capital and other legally mobilized capital sources;

c) Credit institutions and foreign bank branches are only allowed to invest in derivative securities after receiving written approval from the State Bank;

d) Insurance enterprises and branches of foreign insurance enterprises are only allowed to invest in derivative securities according to the provisions of law on insurance business;

d) State-owned economic groups, state-owned corporations, and state-owned enterprises are only allowed to invest in derivative securities after receiving permission from a competent state authority to do so in accordance with the law on management and use of state capital in production and business activities at the enterprise.

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Thus, according to the above regulations, securities investment fund management companies are only allowed to invest in derivative securities for the purpose of hedging risks for the securities portfolio currently held with respect to entrusted capital from investment portfolio management activities; Fund management companies are only allowed to invest in derivative securities for the purpose of preventing risks according to the provisions of law on securities investment funds for capital sources of securities investment funds and securities investment companies.

Fund management companies are not allowed to invest in derivative securities from their own capital, loan capital and other legally mobilized capital sources.A securities investment fund management company to invest in derivative securities must have how much charter capital?A securities investment fund management company to invest in derivative securities must have charter capital as prescribed in Clause 3, Article 4 of Decree 158/2020/ND-CP as follows:

Conditions for issuance of Certificate of eligibility for derivatives trading

1. Securities companies and securities investment fund management companies (hereinafter referred to as fund management companies) may only conduct derivatives trading after being granted a Certificate of eligibility for derivatives trading by the State Securities Commission:

a) Securities companies are allowed to carry out one or several or all derivative securities business activities, including: derivative securities brokerage, derivative securities self-trading, derivative securities investment consulting;

b) Fund management companies are only allowed to conduct derivative securities investment consulting activities.

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3. Conditions to be granted a Certificate of eligibility to trade derivative securities for a fund management company include:

a) Have charter capital and minimum equity of 25 billion VND or more;

b) Director (General Director), Deputy Director (Deputy General Director) in charge of operations and at least 05 employees for derivative securities investment consulting activities with securities practice certificates and professional certificates on derivative securities and derivative securities market;

c) Meets the provisions in Points dd, e, g, h, Clause 2 of this Article.

Thus, according to the above regulations, a securities investment fund management company to invest in derivative securities must have a charter capital of VND 25 billion or more.

In what cases is a securities investment fund management company terminated from derivatives trading activities?

Pursuant to Clause 1, Article 8 of Decree 158/2020/ND-CP, a securities investment fund management company will be terminated from derivatives trading activities in the following cases:

– After the period of suspension of derivatives trading activities, violations still cannot be corrected, leading to suspension of operations;

– Dissolution, bankruptcy, temporary suspension of operations or revocation of establishment and operation license; divided, separated, consolidated or merged, but the organization formed after the division, separation, consolidation or merger does not meet one of the business conditions specified in Clauses 2 and 3, Article 4 of this Decree.