New Measures Expected to Facilitate Foreign Investors

According to the Draft Circular regulating securities investment activities of foreign investors in Vietnam stock market, replacing Decision 21/2008/QD-BTC recently released by State Securities Commission (SSC) to collect feedback from market members, foreign investors will easily join the Vietnam stock market thanks to a variety of recently proposed measures.

 

There are two big changes in the Draft Circular from the current applicable regulations, which are significantly simplified administrative procedures for foreign investors to join Vietnam stock market and broader definition of foreign investor. This reform is to create preferential conditions for foreign investors wishing to join Vietnam stock market.

 

Difficulties in registration for legal entity record of individual foreign investors in some countries are an alarming obstacle when they want to join Vietnam stock market. It typically takes foreign investors 3-6 months to have their legal record completed. This problem has been raised for years and the Ministry of Finance and SSC have worked out the solution.

 

After a long wait, their expectation is going to be met when the Draft Circular providing guidance on investment activities of foreign investors in Vietnam stock market proposes specific tackling measures. Accordingly, instead of judicial record when applying for transaction ID, individual foreign investors only have to submit a legal copy of valid visa or social cards or other ID.

 

Another change in the Draft Circular is regulation of record registering for securities transaction ID for foreign investors. Accordingly, only documents issued by the government agencies in the country of origin need to be legalized under Vietnamese law. Those composed by foreign investors themselves, not issued by government agencies just need to be publicly certified under foreign law. It is also unnecessary for the documents to be translated into Vietnamese for certification, but translated by legally operating in Vietnam or by depository bank. Within 5 working days from full receipt of valid documents, Vietnam Securities Depository (VSD) will issue transaction ID for investing organizations and the duration for individual investors is 3 days.

 

However, an open direction of higher importance in the Draft Circular is VSD can issue transaction ID to foreign investors even when there are not enough documents that need legalizing. In particular, under the Draft Circular, foreign investors can submit legalized documents in 6 months from receiving transaction ID.

 

Given this approach and measure, it is obvious that the procedures of registering for transaction ID have been changed toward easier compliance for investors, helping foreigners not to miss investment opportunities.

 

So why does consular legalization simplification not eliminate this procedure, but only change the time of receiving the documents? The head of SSC explained that it is the most suitable solution in the context that related laws haven’t seen parallel adjustment. Under laws of consular legalization, all documents and papers from other countries must be legalized, unless regulated by other laws or international conventions Vietnam signed or agreed.

 

Another notable point in the Draft Circular is the broader definition of foreign investors. Accordingly, foreign investors include closed-end fund, partnership fund and securities investment company with foreign contribution exceeding 49 percent.

 

According to head of SSC, such broader definition of foreign investors will actually support the stock market to attract foreign capital. This is a move in policy to suit international commitments and actively increase competitiveness for Vietnam stock market. This, plus measures to simplify administrative procedures for foreign investors to join Vietnam stock market will make a move in the effort to attract more foreign capital to the market in coming time.

 

DTCK