Decision No. 399/QĐ-UBCK on Issuing Regulations on Supervision of Fund Management Companies, Fund Asset Custodian Banks, and Securities Investment Funds

DECISION

On Issuing Regulations on Supervision of Fund Management Companies, Fund Asset Custodian Banks, and Securities Investment Funds

CHAIRMAN OF THE STATE SECURITIES COMMISSION

Pursuant to Government Decree No. 144/2003/NĐ-CP dated November 28, 2003, on securities and the securities market;

Pursuant to Prime Minister's Decision No. 161/2004/QĐ-TTg dated September 7, 2004, defining the functions, tasks, powers, and organizational structure of the State Securities Commission;

At the proposal of the Head of the Securities Business Management Department, Chief Inspector,

DECIDES:

Article 1. To issue together with this Decision the Regulations on Supervision of Fund Management Companies, Fund Asset Custodian Banks, and Securities Investment Funds.

Article 2.

This Decision takes effect from the date of signing.

Article 3.

The Chief of the Office, Head of the Securities Business Management Department, Chief Inspector, Director of the Securities Trading Center, and Heads of relevant units under the State Securities Commission are responsible for implementing this Decision.

Regulations on Supervision of Fund Management Companies, Fund Asset Custodian Banks, and Securities Investment Funds

(Issued together with Decision No. 399/QĐ-UBCK dated September 15, 2005, of the Chairman of the State Securities Commission)

I. General Provisions

1. Supervision Objectives

Supervision of fund management companies, securities investment funds, and custodian banks aims to ensure that the activities of fund management companies, custodian banks, and securities investment funds are conducted openly, transparently, and in compliance with legal documents on securities and the securities market; and to protect the legitimate rights and interests of investors.

2. Basis for Supervision

Supervision of fund management companies, fund asset custodian banks, and securities investment funds is based on legal documents on securities and the securities market:

a. Government Decree No. 144/2003/NĐ-CP dated November 28, 2003, on securities and the securities market;

b. Prime Minister's Decision No. 161/2004/QĐ-TTg dated September 7, 2004, defining the functions, tasks, powers, and organizational structure of the State Securities Commission;

c. Minister of Finance Decision No. 73/2004/QĐ-BTC dated September 3, 2004, on issuing the Charter on Organization and Operation of Securities Investment Funds and Fund Management Companies;

d. Other relevant guiding documents.

3. Supervised Entities

The supervised entities specified in this document are fund management companies, custodian banks, and securities investment funds within the scope regulated by Government Decree No. 144/2003/NĐ-CP dated November 28, 2003, on securities and the securities market, and its implementing guiding documents.

II. Specific Provisions

1. Supervision of Fund Management Companies and Securities Investment Funds

1.1. Supervision Activities at the Securities Business Management Department

Supervision of fund management companies and securities investment funds at the Securities Business Management Department (QLKDCK) focuses on the following main contents:

a. Supervision of compliance with legal regulations regarding the maintenance of licensing conditions for fund management companies and licensed fund managers;

b. Supervision of changes or additions to the business lines of fund management companies; establishment or closure of branches; changes to headquarters or branch offices; cessation of business activities; increase or decrease of charter capital; transfer of shares or capital contributions to foreign parties by fund management companies;

c. Supervision of the reporting system of fund management companies, including periodic reports and extraordinary reports;

d. Supervision of the information disclosure system of fund management companies and securities investment funds;

e. Supervision of financial indicators and operational results of fund management companies;

f. Supervision of legal compliance by fund management companies and licensed fund managers when managing securities investment funds;

g. Supervision and notification to the Inspectorate of the State Securities Commission regarding rectification of activities or remediation of violations by fund management companies or licensed fund managers in accordance with legal regulations;

h. Supervision of the issuance of fund certificates to raise capital for public funds;

i. Supervision of the maintenance of licensing and registration conditions for securities investment funds;

j. Supervision of trading activities of fund certificates or transfer of capital contributions into funds for securities investment funds that are not listed/registered for trading;

k. Supervision of the exercise of rights and obligations of the fund representative council and its members;

l. Supervision of compliance with investment restrictions of the fund;

m. Supervision of fund asset transactions with related parties and situations that may lead to conflicts of interest among parties;

n. Supervision of indicators evaluating fund operational results and fund income distribution;

o. Supervision of compliance with regulations on determining the net asset value of the fund;

p. Monitoring and analyzing market information related to fund management companies and securities investment funds received by the State Securities Commission (SSC);

q. Supervision of compliance with other legal regulations related to fund management companies and securities investment funds.

1.2. Supervision Activities at Securities Trading Centers

Supervision activities at Securities Trading Centers focus on contents related to the listing and trading of fund certificates, information disclosure, and market rumors, similar to the treatment of any listed/registered security.

2. Supervision of Custodian Banks

The Securities Business Management Department is responsible for supervising the activities of custodian banks according to the following main contents:

a. Supervision of the maintenance of conditions to perform the functions of the fund asset custodian bank as prescribed;

b. Supervision of the exercise of rights and obligations of the custodian bank towards fund management companies and securities investment funds; Compliance with relationships between the custodian bank and fund management companies as prescribed by law;

c. Supervision of compliance with organizational and operational principles and regulations regarding custodian banks;

d. Supervision of the implementation of the periodic reporting system by custodian banks.

3. Forms of Supervision

Supervision of fund management companies, custodian banks, and securities investment funds is conducted through two forms:

a. Remote supervision: Conducted through reports, official letters, explanatory documents, and disclosed information from fund management companies and custodian banks.

b. On-site supervision: Conducted through periodic annual inspections or extraordinary inspections when serious or complex incidents occur requiring additional evidence collection at fund management companies or custodian banks. The Securities Business Management Department is responsible for proposing to the SSC Leadership for on-site inspections of fund management companies and custodian banks, and for leading and coordinating with other units to implement such inspections.

4. Coordination in Supervision and Handling Violations among SSC Units

a. The Securities Business Management Department is responsible for leading the supervision of fund management companies, custodian banks, and securities investment funds. On a monthly basis, the Securities Business Management Department is responsible for preparing reports on supervision results of fund management companies, custodian banks, and securities investment funds according to supervision contents, submitting them to the SSC Leadership, and simultaneously sending them to the SSC Inspectorate for coordinated supervision.

b. Securities Trading Centers, within their responsibilities, coordinate with the Securities Business Management Department in supervising fund management companies, custodian banks, and securities investment funds by reporting to the SSC any unusual incidents or signs of violations related to listed/registered fund certificates.

c. The SSC Inspectorate is responsible for coordinating with the Securities Business Management Department in supervising fund management companies, custodian banks, securities investment funds, and licensed fund managers by providing collected information. In case of detecting signs of violations by fund management companies, custodian banks, or licensed fund managers, or when notified by the Securities Business Management Department or Securities Trading Centers about cases of legal violations requiring handling, the Inspectorate is responsible for compiling reports for SSC Leadership, conducting investigations, concluding findings, and proposing handling measures according to regulations.

d. The Securities Business Management Department, SSC Inspectorate, and Securities Trading Centers are responsible for creating and maintaining supervision files for fund management companies, custodian banks, and securities investment funds within their respective responsibilities.

III. Organization of Implementation

1. The Securities Business Management Department, SSC Inspectorate, and Securities Trading Centers are responsible for coordinating to implement these regulations.

2. During implementation, if difficulties or obstacles arise, units are requested to report to the SSC Chairman for consideration and resolution.