Inspection Conclusion No. 04/KL-TT Regarding I.P.A Securities Fund Management Company

On January 17, 2025, the Inspection Department of the State Securities Commission issued Inspection Conclusion No. 04/KL-TT regarding the inspection at I.P.A Securities Fund Management Company Limited. The full text of the conclusion is as follows:

1. General Overview I.P.A Securities Fund Management Company Limited (the Company/IPAAM) was established and operates under License for establishment and operation of securities fund management No. 30/UBCK-GP dated March 4, 2008; and the most recent License adjustment No. 12/GPĐC-UBCK dated March 5, 2024, issued by the State Securities Commission (SSC).

Licensed business activities: Securities fund management; Securities portfolio management; Securities investment advisory.

The Company's charter capital as of December 31, 2023, and September 30, 2024, was 100 billion VND. The Company is a subsidiary of I.P.A Investment Joint Stock Corporation (owning 100% of the Company's charter capital) according to Business Registration Certificate No. 0102703178, initially registered on March 4, 2008, with the second amendment on December 13, 2023. Prior to this, the Company was a subsidiary of VNDIRECT Joint Stock Securities Company (VNDS) (owning 100% of the Company's charter capital).

2. Inspection and Verification Results

2.1. Maintenance of Licensing Conditions The Company meets the conditions for maintaining operational licenses regarding infrastructure, minimum charter capital, and personnel as stipulated in Clause 4 and Clause 5 of Article 75, Clause 1 of Article 135 of the Securities Law; Clause 3 of Article 175 of Government Decree No. 155/2020/NĐ-CP dated December 31, 2020, detailing certain articles of the Securities Law (Decree No. 155/2020/NĐ-CP); and Clauses 2 and 3 of Article 7, Clause 20 of Article 10 of Circular No. 99/2020/TT-BTC dated November 16, 2020, of the Minister of the Ministry of Finance guiding the operation of securities fund management companies (Circular No. 99/2020/TT-BTC).

2.2. Organizational Structure of the Company

• Organizational Structure: The Company is organized as a one-member limited liability company, managed and operated under the model: Company Chairman, General Director. The Company has issued the Regulations on Organization and Operation defining the functions and tasks of business departments within the Company. According to documents provided by the Company, the Company has 09 departments including: Internal Control Department, Internal Audit Department, Fund Management Department, Portfolio Management Department, Investment Advisory Department, Proprietary Trading Department, Product Development Department, Operations Management Department, and Financial Accounting Department.

• Company Charter: The Company Charter was last amended on November 26, 2024. The content of the Company Charter is basically consistent with the Company's organizational and operational model and contains at least the contents specified in the Model Charter attached to Circular No. 99/2020/TT-BTC.

• Business Processes: Basically, the Company has issued all relevant processes related to the operation of the fund management company and licensed business activities as stipulated in Clause 2 of Article 10 of Circular No. 99/2020/TT-BTC. The Company's processes are consistent with legal regulations; however, some business processes have not been supplemented or updated with the legal bases for issuance as required by the Securities Law, Decrees, and current Circulars (processes for portfolio swap fund management, investment advisory business processes).

2.3. Internal Control, Internal Audit, and Risk Management Activities

2.3.1. Internal Control Activity The Company has established an Internal Control Department and issued an Internal Control Process.

During the inspection period, the personnel and structure of the Internal Control Department met the conditions stipulated in Clauses 3 and 4 of Article 6 of Circular No. 99/2020/TT-BTC.

The Company has submitted annual Internal Control Reports as required.

2.3.2. Internal Audit Activity The Company established an Internal Audit Department and issued an Internal Audit Process.

The Company has appointed personnel to serve as Head of the Internal Audit Department. The personnel structure of the Company's Internal Audit Department lacks personnel meeting the requirements of Clause 5 of Article 5 of Circular No. 99/2020/TT-BTC.

The Company has submitted annual Internal Audit Reports as required.

2.3.3. Risk Management Activity The Company has issued strategies and policies for risk management of securities investment funds, strategies and policies for risk management of portfolio management activities and other activities, and a Risk Management Process for the Company's business operations.

Basically, the Company's risk management activity meets the requirements of Clause 4 of Article 10 of Circular No. 99/2020/TT-BTC.

During the inspection period, the Company prepared periodic Risk Management Reports annually and semi-annually as required by point c, Clause 3, Article 29 of Circular No. 99/2020/TT-BTC.

2.4. Securities Investment Fund Management Activity During the inspection period, the Company had 03 active open funds: VND Active Investment Fund (VNDAF), VND Bond Investment Fund (VNDBF), VND Flexible Bond Fund (VNDCF); 01 ETF fund: IPAAM VN100 ETF Fund (IPAAM VN100); and 01 member fund: IPA Member Investment Fund.

2.4.1. VND Active Investment Fund (VNDAF)

• General Information: The VND Active Investment Fund was established as an open fund under Fund Registration Certificate No. 30/GCN-UBCK issued by the SSC on January 12, 2018, with initial charter capital of 56,596.5 million VND, and an indefinite operational period. The supervising bank is Bank for Investment and Development of Vietnam - Hanoibank Branch (BIDV Hanoibank). The transfer agent is the Vietnam Securities Depository and Clearing Corporation (VSDC). The fund currently has 03 members of the Fund Representative Board and 02 fund managers.

Distribution agents include: VNDS, Fincorp Joint Stock Company, IPAAM, Vina Joint Stock Securities Company. The number of investors holding fund certificates as of October 31, 2024, was 10,818 investors.

• The Fund Representative Board has held meetings ensuring at least once per quarter as required by the Fund Charter. The Company organized the Annual General Meeting of Investors for the years 2022, 2023, and 2024 as required by the Fund Charter.

• Operational Results: According to the Fund's report as of October 31, 2024, the cumulative realized investment results of Fund VNDAF were 21,723.07 million VND, and the cumulative unrealized investment results were 14,442.28 million VND.

2.4.2. VND Bond Investment Fund (VNDBF)

• General Information: The VND Bond Investment Fund was established as an open fund under Fund Registration Certificate No. 38/GCN-UBCK issued by the SSC on July 5, 2019, with initial charter capital of 50,335 million VND, and an unlimited operational period. The supervising bank is BIDV Hanoibank. The transfer agent is VSDC. The fund currently has 04 members of the Fund Representative Board and 02 fund managers. The fund certificate distribution agent is VNDS. The number of investors holding fund certificates as of October 31, 2024, was 6,907 investors.

• The Fund Representative Board has held meetings ensuring at least once per quarter as required by the Fund Charter. The Company organized the Annual General Meeting of Investors for the years 2022, 2023, and 2024, and the Extraordinary General Meeting of Investors in 2022 as required by the Fund Charter.

• Operational Results: According to the Fund's report as of October 31, 2024, the cumulative realized operational results of fund VNDBF were 14,633.45 million VND, and the cumulative unrealized operational results were 403.26 million VND.

2.4.3. VND Flexible Bond Investment Fund (VNDCF)

• General Information: The VND Flexible Bond Investment Fund was established as an open fund under Fund Registration Certificate No. 267/GCN-UBCK issued by the SSC on August 18, 2023, with fund charter capital of 50,134 million VND, and an indefinite operational period. The supervising bank is BIDV Hanoibank. The transfer agent is VSDC. Distribution agents: VNDS, Fincorp Joint Stock Company, IPAAM. The fund currently has 03 members of the Fund Representative Board and 02 fund managers. The number of investors holding fund certificates as of October 31, 2024, was 771 investors.

• The Fund Representative Board has held meetings ensuring at least once per quarter as required by the Fund Charter. The Company organized the Annual General Meeting of Investors for the year 2024 as required by the Fund Charter.

• Operational Results: According to the Fund's Financial Statements as of October 31, 2024, the cumulative realized operational results of fund VNDCF were 4,106.94 million VND, and the cumulative unrealized operational results were 64.63 million VND.

2.4.4. IPAAM VN100 ETF Fund (IPAAM VN100)

• General Information: The IPAAM VN100 ETF Fund is an exchange-traded fund established under Fund Registration Certificate No. 37/GCN-UBCK issued by the SSC on September 14, 2021, with fund charter capital of 52,000 million VND, and an indefinite operational period. The supervising bank is the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank). The transfer agent is VSDC. The fund creator and distribution agent are VNDS and the Joint Stock Commercial Bank for Investment and Development of Vietnam.

The fund currently has 03 members of the Fund Representative Board and 02 fund managers. The number of investors holding fund certificates as of October 31, 2024, was 700 investors.

• The Fund Representative Board has held meetings ensuring at least once per quarter as required by the Fund Charter. The Company organized the Annual General Meeting of Investors for the years 2022, 2023, and 2024 as required by the Fund Charter.

• Operational Results: According to the Fund's Financial Statements as of October 31, 2024, the cumulative realized operational results of Fund ETF IPAAM VN100 were -495.81 million VND, and the cumulative unrealized investment results were 7,970.68 million VND.

2.4.5. IPA Member Investment Fund

• General Information: The IPA Member Investment Fund is a member fund established under Member Fund Registration Certificate No. 29/GCN-UBCK issued by the SSC on April 4, 2024, with charter capital of 50,000 million VND, and an operational period of 05 years. The custodian bank is the Joint Stock Commercial Bank for Industry and Trade of Vietnam – Hanoi Branch. The fund currently has 03 members of the Fund Representative Board and 02 fund managers.

• The Fund Representative Board has held meetings ensuring at least once per quarter. The Company organized the Annual General Meeting of Investors in 2024 and the Extraordinary General Meeting of Investors in 2024.

• Operational Results: According to the periodic report as of October 2024, the cumulative investment results (from the beginning of the year) were -4,345.94 million VND. The net asset value of the Fund is 45,654.05 million VND, and the net asset value per fund unit is 9,130.81 VND/fund certificate.

2.5. Portfolio Management Activity The Company issued the Portfolio Management Process according to Decision No. 50/2021/QĐ-TGĐ dated September 10, 2021, by the General Director; the Process for Trading Entrusted Portfolio and Asset Allocation according to Decision No. 48/2021/QĐ-TGĐ dated September 8, 2021, by the General Director; and the Valuation Manual for Portfolio Management Business according to Decision No. 53/2021/QĐ-TGĐ dated September 12, 2021, by the General Director. The processes have been updated according to current regulations.

During the inspection period, the total number of portfolio management contracts the Company was executing at various times were as follows: As of January 1, 2022: 08 contracts, including 02 contracts with institutional clients and 06 contracts with individual clients; As of December 31, 2022, December 31, 2023, and October 31, 2024: the number of contracts were 04, 03, and 02 respectively, all of which were contracts with institutional clients.

The Company signed a Securities Custody Contract with BIDV Hanoibank, a Custody Service Contract for entrusted investment portfolios with the Joint Stock Commercial Bank for Foreign Trade of Vietnam, and has custody accounts for each investor.

During the inspection period, the Company had 04 institutional clients and 06 individual clients. As of the inspection date, the Company had 02 institutional clients remaining.

For institutional clients, the Company has executed Investment Entrustment Contracts with the clients. Basically, the entrusting clients authorize the Company to stand as the nominal owner of assets according to the portfolio and designate the Company to invest in portfolio stocks (listed and unlisted), except for VNDS which entrusts the Company to manage the portfolio on the securities trading account under VNDS's name. The Company reports portfolio activities to entrusting clients via secure mail delivery or directly to the clients.

Annually, the Company has updated customer identification information.

For individual clients, the Company has executed Investment Entrustment Contracts with the clients and opened custody accounts for each client at BIDV Hanoibank. Clients authorize the Company to stand as the nominal owner of assets according to the portfolio and designate the Company to invest in listed stocks. The Company reports portfolio activities to entrusting clients via the email address registered in the entrustment contract. The Company terminated contracts with 06 individual clients in 2022.

2.6. Securities Investment Advisory Activity During the inspection period, the Company did not generate any securities investment advisory business.

2.7. Anti-Money Laundering and Counter-Terrorist Financing Work The Company issued internal regulations on anti-money laundering and counter-terrorist financing on November 1, 2024 (replacing the Decision issued on September 12, 2021).

The Company has registered with the Anti-Money Laundering Department under the Banking Inspection and Supervision Authority (State Bank of Vietnam) information regarding the officer in charge of reporting on anti-money laundering work.

The Company has submitted annual internal control reports on anti-money laundering to the Anti-Money Laundering Department as required.

2.8. Reporting and Information Disclosure Regime

• Regarding subjects performing information disclosure: During the inspection period, the person in charge of performing information disclosure for the Company was Ms. Nguyen Ho Nga, General Director of the Company (from January 1, 2022, to June 24, 2024), and Ms. Nguyen Thi Thuy Lan, Chief Accountant of the Company (from June 24, 2024, to the inspection date).

The Company has established an electronic information page at https://ipaam.com.vn/vi/home/ to perform periodic and ad hoc information disclosure obligations as required.

• Regarding the reporting and information disclosure regime: During the inspection period, basically, the Company has implemented the reporting regime and information disclosure obligations as required.

2.9. Financial Investment Activity The Company issued Decision No. 27/01/2024 dated March 9, 2024, regarding the operation regulations for financial investment at IPAAM. The Company opened 01 securities account at VNDS to conduct the Company's financial investment activities.

According to the audited 2022 Financial Statements and the Q1/2023 Financial Statements self-prepared by the Company, at the times of December 31, 2022, and March 31, 2023, the total value of IPAAM's financial investments was greater than IPAAM's equity capital, specifically: At the time of December 31, 2022, the total value of IPAAM's financial investments was 137,657.14 million VND, and IPAAM's equity capital at this time was 135,609.73 million VND; at the time of March 31, 2023, the total value of IPAAM's financial investments was 137,099.1 million VND and equity capital was 134,939.5 million VND. Thus, IPAAM used funds other than equity capital for financial investments, violating point a, Clause 21, Article 10 of Circular No. 99/2020/TT-BTC.

2.10. Financial Safety Ratio Report IPAAM prepared and submitted periodic reports to the SSC regarding the financial safety ratio as required by Circular No. 91/2020/TT-BTC dated November 13, 2020, of the Minister of the Ministry of Finance regulating financial safety indicators and handling measures for securities business organizations that do not meet financial safety indicators (Circular No. 91/2020/TT-BTC).

According to IPAAM's reports, the available capital ratio according to the audited and reviewed Financial Safety Ratio Reports at the times of December 31, 2022, June 30, 2023, December 31, 2023, and June 30, 2024, were 477.88%, 489.56%, 480.39%, and 542.27% respectively. Basically, IPAAM's available capital ratio meets the financial safety indicator for securities business organizations as required by Circular No. 91/2020/TT-BTC.

3. Conclusion During the inspection period, the Company basically complied with securities legal regulations regarding the inspection content. However, the Company had violations as stated in Section 2 of the Inspection Conclusion.

4. Handling Measures within Competence During the inspection process, the Inspection Team required the Company to urgently take measures to rectify and overcome violations, specifically as follows:

• Regarding business processes: Update the Company's business processes according to current legal regulations.
• Regarding the Internal Audit Department: Rectify and supplement to ensure the personnel structure of the Internal Audit Department meets the conditions according to legal regulations.
• Regarding the Company's financial investment activity: Ensure strict compliance with securities legal regulations regarding the financial investment of fund management companies.

5. Recommendations for Handling Measures

5.1. Regarding the Company's violations stated in Sections 2.3.2 and 2.9 of the Inspection Conclusion (failure to ensure personnel structure at the internal audit department and violation of regulations on financial investment), the SSC Inspection Department recommends the SSC consider handling the violations according to legal regulations.

5.2. The SSC Inspection Department requests the Company to urgently take measures to rectify and overcome violations (update the Company's business processes according to current legal regulations; rectify and supplement to ensure the personnel structure of the Internal Audit Department meets legal regulations; ensure strict compliance with securities legal regulations regarding the financial investment of the fund management company).

The SSC Inspection Department requires the Company to implement the following rectification and overcoming measures immediately after the inspection within a period of 30 days from the date of signing the inspection conclusion. The result report must be sent to the SSC Inspection Department within 05 days from the date the rectification and overcoming period expires.