Transparency Law: More Opportunities for Foreign Investors and Economy

Mr Nguyen Hoang Hai, General Secretary of VAFI, proposed the main contents should be changed and some procedures should be omitted.

 

One, the part of “Documents applied for the establishment of representative offices and branches of foreign fund management companies or investment operation licences have two requirements: the papers about the enterprises shall be verified and certified by competent organs of the countries of origin and, at the same time, the papers need consular legalisation via Vietnamese embassies in those countries.” Many countries do not have Vietnamese embassies; so where should foreign investors go to obtain consular legalisation? In addition, it is difficult for embassies to have sufficient information about the companies planning to invest in Vietnam. The VAFI thinks that these procedures are unnecessary and complicated for investors.

 

Point 7 of Clause 4 stipulates “To ensure the sustainable development of the market and for the objective of investor protection, SSC has the authority to reject the certification of investment operation registration for foreign investors based on information provided by foreign investors or information about violations of foreign investors in the finance and banking fields provided by foreign state management agencies. In case of rejection, SSC will answer in a written document with clear explanation.”

The VAFI analysed that the rejection of investment operation certification should only be applied to cases with serious violations. If rejection is based only on a range of violation, it easily leads to abuse of authority for private benefit. To err is human; thus, it is necessary to define which kinds of serious violations will be rejected.

 

The Clause 7 stipulates that “Foreign investors are revoked their investment operation licences in the following cases: Application documents for investment operation registration having incorrect information or omitting important contents under the regulation; dishonest, incorrect, or untimely declaration of contents as required by the SSC; violation of foreign investors in ownership proportion limits and other regulations on foreign exchange under the law of Vietnam.” The VAFI analysed that many law violations result from unclear legal documents or limited understanding of staff. So, is revocation applicable in these cases?

 

Point 2b of Clause 20 provides that “The branches of foreign fund management companies are allowed to employ Vietnamese and foreign people. After each time of recruitment to supplement foreign employees working for the branches, foreign securities trading organisations have to receive permits of approval from the SSC and other verification documents from competent organs.” This is certainly a kind of sub-licence. The Securities Law does not have this provision; hence, it is invalid. The SSC should clearly define the particular cases in which foreign people are not allowed to work for branches of foreign fund management companies. After each time of recruitment, companies are responsible for reporting to the SSC.

 

At present, the organisation of granting professional practice certificates for domestic and foreign people is very complicated, time consuming and ineffective. It only has local benefit. The procedural difficulty is a barrier to the import of intellectually capable staff, in the context of a serious shortage of high-quality human resources for the Vietnamese stock market. If the professional practice certificate is maintained, foreign investors need only check their knowledge of Vietnamese laws, while the SSC is always ready to satisfy all requirements from enterprises at any time and without any intentional barriers.

 

If the regulation of Clause 24 is made effective, branches of foreign fund management companies are likely to face licence revocation by virtue of small violations or misunderstanding of Vietnamese laws. In the draft regulations, all violations, trivial or serious, of foreign investors could lead to the revocation of investment licences, representative office licences or branch licences without any prior administrative punishments of employees or enterprises. In which cases of serious legal violations will employees and enterprises face punishment?

 

Seven, Clause 29 provides that the financial year of the branches of fund management companies starts from January 1 to December 31 of the solar calendar. Is this logical and fitting for the financial year of foreign fund management companies? 

 

Eight, Clause 35 stipulates that Vietnamese people working for representative offices shall have curriculum vitae verified by local authorities. Is this rational, as local authorities cannot know the exact character and history of every individual? They can merely verify permanent residence status.

 

Nine, Clause 36 stipulates that representative office licences of foreign organisations are valid five years, and renewal must be granted for continuous operation. This irrational procedure needs to be eradicated. The operational validity should be the same as other commercial representative offices. In the draft regulations, the SSC requires regular reports on representative office operations; thus, it has full information about the operations of the representative offices.

 

Clause 38 limits the maximum number of foreign people in a representative office to five, but the Labour Code does not impose a limit, only requiring a working permit application. The limitation will pose difficulties to the operation of representative offices in certain contexts like: insufficient Vietnamese workforce, sudden termination by Vietnamese employees leaving a vacancy, and the foreign fund management companies’ sending of foreign staff to learn the Vietnamese environment before appointing them to positions in future joint venture projects.

 

Foreign investors have applied for the investment operation licence; therefore, they do not need to apply for transaction codes. Certainly, after having the investment operation license, the Securities Custody Centre will automatically grant the transaction codes without any further requirements. As for the Securities Custody Centre, when a foreign investor submits the documents for the SSC, it only needs to send an identical set to the Centre to set up an information record.