New rules for foreign
The Ministry of Finance
issued Decision 121/QD-BTC on December 24, 2008, setting forth new rules to
govern foreign investors on the nation’s stock markets.
The new rules apply to: (i)
individuals with foreign nationality wherever residing, including overseas
Vietnamese; (ii) organisations established and operating under foreign law, and
branches of such organisations whether or not operating in Viet Nam; (iii)
entirely foreign-owned enterprises operating in Viet Nam, and branches of such
organisations; (iv) investment funds established and operating under foreign
law, or under the law of Viet Nam but with 100-percent foreign-owned capital;
and (v) others as specified by the Prime Minister.
The regulation says such
investors may participate in the securities market by buying and selling shares,
bonds and other types of securities listed on the HCM City Stock Exchange or at
the Ha Noi Securities Trading Centre, securities registered for trading at
securities companies, and on the over-the-counter market. They may also
participate in auctions to buy securities, including shares of enterprises
In addition, foreign
investors can contribute capital to the establishment of securities investment
funds (at ratios permitted under current law), or may invest in a fund managed
Under earlier regulations
(Circular No 90/2005/TT-BTC of October 2005), foreign investors investing in
listed securities were required to obtain a securities trading code number (SCTN)
from the Viet Nam Securities Depository Centre. Under Decision No 121, this
requirement is expanded. Each foreign investor – except those whose investment
is solely made through other fund management companies – is required to obtain
Decision No 121 also
requires foreign investors to notify and obtain approval from the Securities
Depository Centre for changes to the securities company or trading
representative through which it conducts trades; the bank account used for
trades; the head-office address, location of business registration, or contact
address; their name or passport number; their legal status or organisational
structure due to division, separation, merger, acquisition or other changes
related to a company’s organisation; or any contents of the dossier submitted
to apply for the STCN.
The new regulation
requires foreign investors to be suspended from securities trading for up to six
months if they omit, misstate or make untimely declarations of information in
application dossiers or in disclosures required by the State Securities
Commission other authorities under the laws; if they willfully violate foreign
exchange laws; or engage in insider transactions, market speculation, fraud,
money laundering, tax evasion or other acts of market abuse.
The STCN will be revoked
if the foreign investor fails to remedy any such violations or error which have
resulted in a trading suspension, within 6 months of the suspension.
Under the new rules, each
foreign investor shall be permitted to open one indirect investment capital
account denominated in Vietnamese dong with a depository bank licensed to
conduct foreign exchange business. All transactions by the foreign investor must
be made through this account.
After obtaining an STCN,
the foreign investor shall be permitted to open a unique securities depository
account via which all payments must be made. In the event that a foreign
investor is a securities company established under foreign law or a 100-per-cent
foreign-owned insurer, the investor may be permitted to open two securities
depository accounts in accordance with Ministry of Finance regulations on
securities registration, depository, clearance and settlement.