Decision No. 125/2008/QD-BTC On amending and supplementing certain provisions of the Charter on organization and operation of Fund Management Companies issued together with Decision No. 35/2007/QD-BTC dated May 15, 2007 of the Minister of Finance.

Pursuant to …;

Regarding the amendment and supplementation of certain Articles of the Regulation on the organization and operation of Fund Management Companies issued together with Decision No. 35/2007/QĐ-BTC dated May 15, 2007 of the Minister of Finance.

_________________________

THE MINISTER OF FINANCE

Pursuant to the Securities Law dated June 29, 2006;

The Minister of Finance issues this Circular amending and supplementing Circular No. 27/2010/TT-BTC dated February 26, 2010 of the Ministry of Finance on the level of collection, payment procedures, management, and use of securities transaction fees applicable at the Stock Exchanges and the Vietnam Securities Depository Center as follows:

Pursuant to Decree No. 118/2008/NĐ-CP dated November 27, 2008, of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

At the proposal of the Chairman of the State Securities Commission,

DECISION:

Article 1. The following amendments and supplements are made to certain Articles of the Regulation on the organization and operation of fund management companies issued together with Decision No. 35/2007/QĐ-BTC dated May 15, 2007 of the Minister of Finance:

1. Add Clause 3a after Clause 3 of Article 3 on Conditions for Issuing Licenses for Establishment and Operation as follows:

“3a. There must be at least two (02) founding shareholders or founding members who are organizations. Among them, there must be at least one organization that is an insurance company, commercial bank, financial company, or securities company. The minimum shareholding ratio of the founding shareholders or founding members who are organizations must be sixty-five percent (65%) of the charter capital, of which the minimum shareholding ratio of the founding shareholders or founding members who are insurance companies, commercial banks, financial companies, or securities companies must be thirty percent (30%) of the charter capital. In the case where the proposed fund management company is established in the form of a limited liability company with one member, the owner must be a commercial bank, financial company, insurance company, or securities company.”

2. Amend and supplement Clause 6 of Article 3 on Conditions for Issuing Licenses for Establishment and Operation as follows:

“6. Conditions for organizations participating in capital contribution:

a) They must be legal entities with a minimum operating period of five (05) years, currently operating legally and not falling under the cases prohibited from establishing and managing enterprises in Vietnam according to Points a and g of Clause 2 and Point a of Clause 4 of Article 13 of the Enterprise Law.

b) They must meet the financial conditions stipulated in Clause 3 of Article 4 of this Regulation and other relevant conditions prescribed by specialized laws.

c) A fund management company established and operating in Vietnam shall not participate in the establishment of other fund management companies in Vietnam through capital contribution, purchasing shares, or equity participation.”

3. Amend Clause 1 of Article 4 on Financial Conditions for Shareholders and Capital Contributors as follows:

“1. Individuals and organizations may only use their own capital or equity to contribute to the establishment of a fund management company and may not use borrowed funds or entrusted investment funds from other organizations or individuals.”

4. Amend Clause 2 of Article 4 on Financial Conditions for Shareholders and Capital Contributors as follows:

“2. For individual shareholders or contributors, they must prove their ability to contribute capital in the form of cash, securities, or other assets. The value of cash, securities, or other assets used to demonstrate financial capacity must be at least equal to the expected capital contribution to establish the fund management company. The confirmation date of the value of cash, securities, or other assets for demonstrating financial capacity must not exceed thirty (30) days from the date when the application file is complete and valid.

For cash assets, a bank's confirmation of the balance of Vietnamese dong or freely convertible foreign currency in the bank account is required.

For securities assets, the securities must be listed on the Stock Exchange or Securities Trading Center and confirmed by a securities company or the issuing organization regarding the number of securities. The value of the securities is calculated based on the closing price on the confirmation date.

For other assets, proof of ownership and valuation by a legally operating valuation organization in Vietnam is required.

Assets used to demonstrate the financial capacity of shareholders or contributors must not be in a state of pledge, mortgage, deposit, guarantee, or collateral, nor involved in disputes, or used to demonstrate financial capacity in other enterprises or for other purposes.”

5. Amend Clause 3 of Article 4 on Financial Conditions for Shareholders and Capital Contributors as follows:

“3. For organizational shareholders or contributors, the contributed capital must be legal and confirmed by an independent auditing organization.

In the most recent audited annual financial report and the most recent quarterly or monthly financial report up to the nearest point in time (but not more than ninety (90) days before the date when the application file for establishing a fund management company is complete and valid), the contributing organization must meet the following conditions:

a) Net owner’s equity after deducting welfare and bonus funds and long-term assets must be at least equal to the expected capital contribution to the fund management company.

In the case of an insurance company: Owner’s equity plus idle funds from insurance reserves after deducting long-term assets must be at least equal to the expected capital contribution to the fund management company.

In the case of a commercial bank or financial company: Registered capital plus additional registered capital reserve fund after deducting long-term assets must be at least equal to the expected capital contribution to the fund management company.

b) Minimum net working capital must be equal to the capital contribution.

c) The organization must have been profitable in the two (02) consecutive years prior to the year of applying to establish a fund management company and must not have accumulated losses up to the date when the application file for establishing a fund management company is complete and valid;

d) In the case of an insurance company, commercial bank, financial company, or securities company participating in capital contribution, after the contribution, these organizations must still maintain and meet the safety capital requirements and other financial conditions stipulated by specialized laws.”

6. Amend Clause 4 of Article 4 on Financial Conditions for Shareholders and Capital Contributors as follows:

"4. Founding shareholders and founding members shall not transfer their shares or capital contributions and must hold all of their shares and capital contributions for a period of three (03) years from the date of issuance of the License for establishment and operation, except in cases of transfers between founding shareholders and founding members. In cases where there are transfers of shares or capital contributions among founding shareholders and founding members, it is still necessary to ensure the maintenance of the ownership ratio at the Fund Management Company as prescribed in Clause 1, Article 1 of this Decision within a period of three (03) years from the date of issuance of the License for establishment and operation."

7. Amend and supplement Point d, i, j of Clause 1, Article 5 on the Application Documents for Issuing the License for Establishment and Operation of a Fund Management Company as follows:

d) A list and curriculum vitae confirmed by the competent authority (in accordance with the model specified in Appendix 4 attached to this Regulation) of the General Director, Deputy General Director or Chief Executive Officer (Deputy Chief Executive Officer) and fund management professionals working at the Fund Management Company, accompanied by a valid copy of the Identity Card or Passport still in effect, a valid copy of the fund management professional certificate (if applicable), a Criminal Record Certificate, a Commitment Letter to work for the Fund Management Company signed by these individuals, accompanied by a document confirming the number of years of experience in the financial-banking sector issued by the General Director, Deputy General Director responsible for fund management operations, portfolio management, or Chief Executive Officer, Deputy Chief Executive Officer responsible for fund management operations, portfolio management. In cases where the individuals mentioned above do not have a fund management professional certificate, supplementary documents include the remaining documents required for applying for a fund management professional certificate as stipulated.

A list and curriculum vitae confirmed by the competent authority (in accordance with the model specified in Appendix 4 attached to this Regulation), a valid copy of the Identity Card or Passport still in effect, a valid copy of the bachelor's degree diploma, a valid copy of relevant professional certificates in securities, a document confirming the years of experience according to the regulations of internal control department staff (if any), and a level of expertise consistent with the provisions of the law for the head of the internal control department (if any).

A list and curriculum vitae confirmed by the competent authority (in accordance with the model specified in Appendix 4 attached to this Regulation), a valid copy of the Identity Card or Passport still in effect of the Board Member of the Supervisory Board.

i) A copy of the most recent annual financial report. In cases where the period from the end date of the accounting year of the most recent financial report to the time when the Application Documents for Issuing the License for Establishment and Operation of a Fund Management Company are complete and valid exceeds ninety (90) days, the organization must submit an additional financial report up to the latest quarter or month. For shareholders or contributors who are parent companies or groups, they must supplement the most recent consolidated annual financial report prepared in accordance with the law. All financial reports must be confirmed by an independent auditing organization operating legally. The audit opinion on the financial reports must fully accept without exception.

j) Repeal Point j.

8. Supplement Clause 1a before Clause 1 of Article 6 on the Procedure for Issuing the License for Establishment and Operation as follows:

“1a. Within thirty (30) days from the date the State Securities Commission requests in writing, the shareholders and contributors establishing the Fund Management Company must supplement and complete the Application Documents for Issuing the License for Establishment and Operation of a Fund Management Company as prescribed. After this deadline, if the shareholders and contributors do not supplement and complete the application documents, the shareholders and contributors must submit new application documents for issuing the License for Establishment and Operation of a Fund Management Company according to the prescribed procedures and formalities.”

9. Amend and supplement Clause 2 of Article 6 on the Procedure for Issuing the License for Establishment and Operation as follows:

“2. Within six (06) months from the date of approval in principle, the shareholders and contributors proposing the issuance of the License for Establishment and Operation of a Fund Management Company must complete the investment in technical infrastructure, freeze capital, finalize organizational personnel structure, and other remaining procedures to obtain the official license. Shareholders and contributors establishing and operating the Fund Management Company may allocate part of their capital contribution to invest in technical infrastructure serving the company's business activities in accordance with the business plan. The remaining capital contribution must be deposited into a frozen account at a bank designated by the State Securities Commission and must be confirmed by the Bank regarding the amount of capital in the frozen account. This capital can only be unfrozen and transferred into the Fund Management Company's account immediately after the Fund Management Company officially receives the License for Establishment and Operation from the State Securities Commission. If the shareholders and contributors fail to complete the licensing procedures within six (06) months from the date the State Securities Commission approves in principle, the approval in principle will be considered nullified.”

10. Amend and supplement Clause 4 of Article 6 on the Procedure for Issuing the License and Establishment and Operation as follows:

“4. If there are any changes related to personnel, headquarters, shareholder structure, contributor structure, or capital contribution levels in the Application Documents for Issuing the License for Establishment and Operation after approval in principle until the official commencement of operations, the approval in principle will be considered nullified.”

11. Supplement Clause 1a after Clause 1 of Article 8 on the Organization of the Fund Management Company as follows:

“1a. Individuals working at the Fund Management Company shall not concurrently work for other economic organizations.”

12. Supplement Clause 14a after Clause 14 of Article 18 on the Provisions on the Responsibilities and Obligations of the Fund Management Company as follows:

"14a. The fund management company is authorized to instruct the custodian bank of the fund member to determine the net asset value of the fund member and the investment portfolio value of the entrusted investor. The department providing services for determining the net asset value at the custodian bank must have staff with auditing or accounting certificates. The fund management company must supervise and ensure that the determination of the net asset value complies with current laws, regulations in the Fund Charter, and the Entrusted Investment Management Contract."

13. Supplement Clause 15a following Clause 15 of Article 18 on the responsibilities and obligations of the fund management company as follows:

"15a. The fund management company is authorized to establish, store, and update the Register of Investors at the custodian bank. The content of the Register of Investors shall comply with the provisions of the Ministry of Finance regarding the establishment and management of securities investment funds. The fund management company must supervise and ensure that the custodian bank establishes, stores, and updates the Register of Investors in accordance with the provisions of the law."

14. Amend and supplement Clause 5 of Article 19 on Restrictions on the Activities of the Fund Management Company and Employees Working at the Fund Management Company as follows:

"5. The fund management company, related parties of the fund management company, and fund managers may not be counterparties buying or selling in transactions involving assets in the investment portfolio of the entrusted investor, or the investment fund managed by the company, except in the following cases:

a) Transactions are conducted through centralized matching systems at the Stock Exchange or Securities Trading Center;

b) Transactions are carried out through negotiated agreements for assets of the fund member or assets in the investment portfolio of the entrusted investor. In this case, before conducting the transaction, written approval from the Investor General Meeting or the Entrusted Investor must be obtained. The approval must specify the type of asset being traded, the trading price, transaction fees and transfer fees, the counterparty, the time of execution, and other conditions (if any), ensuring compliance with Article 120 of the Enterprise Law and other relevant regulations."

15. Amend and supplement Clause 9 of Article 19 on Restrictions on the Activities of the Fund Management Company and Employees Working at the Fund Management Company as follows:

"9. The fund management company may only use business capital allocated for financial investment activities to invest in fund members, individually issued securities companies that it manages, if the Fund Charter or the Company Charter permits such investments. The fund management company may not use the capital of the fund or the securities company to invest in other funds or securities companies established and operating in Vietnam."

16. Amend and supplement Clause 1 of Article 24 on Financial Safety for the Fund Management Company as follows:

"1. The fund management company must ensure that the business capital allocated for financial investment activities comes from the subscribed registered capital of the company, additional reserve capital, and undistributed profits. The fund management company may not use borrowed capital, entrusted capital, or occupied capital from other organizations or individuals to purchase stocks, bonds, or participate in the establishment of enterprises. For major shareholders, large contributors, supervisory board members, board of directors, board of members, general managers, deputy general managers, and related parties of these entities, the company may not lend under any form or entrust the company's capital to related individuals or organizations for management."

17. Amend and supplement Clause 1 of Article 30 on Management of Entrusted Investor Assets as follows:

"1. When managing the investment portfolio, the fund management company must open a custodial account in its name at the custodian bank on behalf of the entrusted investor.

Portfolio management includes the following contents:

a) Collecting and updating information about the financial capacity, risk tolerance, investment restrictions, and investment activity requirements of the entrusted investor. Signing an investment management contract specifying the investment objectives, investment restrictions, and risks that the investor can accept to achieve the investment goals;

b) Based on the information provided by the entrusted investor, planning and advising on investment strategies, advising on the structure and allocation of investment capital for the entrusted investor; developing an investment strategy consistent with the financial capacity, risk tolerance, and investment restrictions (if any) of the entrusted investor as well as market conditions;

c) Implementing investments for the entrusted investor, selecting securities, trading prices, and timing, in line with the investment strategy and the agreed authorization stipulated in the Investment Management Contract;

d) Updating personal information as specified in Point a of this Clause, investment requirements of the entrusted investor, and market conditions. Based on this information, adjusting the portfolio structure to meet the investor's requirements and market conditions."

18. Supplement Clause 2a following Clause 2 of Article 30 on Management of Entrusted Investor Assets as follows:

"2a. The fund management company shall manage the investment portfolio and conduct investments on the account of the entrusted investor according to the contract between the fund management company and the entrusted investor. The contract must clearly define the scope, authority, obligations of the relevant parties; investment strategy and investment restrictions; responsibilities and reporting systems regarding investment activities, settlement, and asset custody in the entrusted investor's portfolio; the duration of the contract's validity; risks arising from managing assets on the customer's account. The investor is responsible for notifying in writing (with confirmation from the fund management company) the securities company where the trading account is opened and the custodian member where the custody account is opened about the fund management company's authority in trading and settlement transactions on the investor's account; about the duration of the validity of the entrustment contract and any limitations (if any) related to the fund management company's management of the investor's funds and assets."

In the case where the fund management company manages the portfolio on the account of the entrusted investor, during the period when the portfolio management contract remains valid, the securities company and the custodian member may only execute trading orders and investment instructions and settle transactions for the purchase and sale of assets and securities based on lawful orders and instructions from the fund management company. The fund management company, securities company, and custodian member shall not use the investor's money and assets for the benefit of the fund management company, securities company, custodian member, or related parties without written authorization from the investor. The fund management company must ensure that transactions conducted for its customers and itself are not market manipulation transactions.

19. Supplement Point a, b Clause 5 Article 33 on Reporting and Information Disclosure System of the Fund Management Company as follows:

"5. The fund management company must report to the State Securities Commission on the following events:

a) Changes, new appointments of members of the Board of Directors, Board of Members, Chairman, Director, Deputy Director, General Director, Deputy General Director, and fund managers. Reports on personnel changes and appointments must be accompanied by personal files of the replacement personnel and related documents verifying that the replacement personnel meet the conditions stipulated;

b) Amendments and supplements to the Company Charter; the Charter, Prospectus of the Fund, and Securities Investment Company managed by the Company. The report must be sent with the amended and supplemented Company Charter, Charter, and Prospectus of the Fund, and Securities Investment Company managed by the Company."

20. Supplement Clause 8a after Clause 8 Article 33 on Reporting and Information Disclosure System of the Fund Management Company as follows:

"8a. In the case where the custodian bank does not provide services to monitor the fund's operations, manage the portfolio, or determine the net asset value of the fund member or the net asset value of the investment portfolio, the custodian bank shall only be responsible for determining the value of cash and the structure of the securities portfolio held at the custodian bank."

21. Amend Appendix 7, Appendix 10, Appendix 12, Appendix 14 of the Regulation on the Organization and Operation of the Fund Management Company (as attached to this Decision).

Article 2. This Decision shall take effect fifteen days after its publication in the Official Gazette.

Article 3. The Head of the Ministry's Office, the Chairman of the State Securities Commission, fund management companies, and related parties are responsible for implementing this Decision./.