Is it permissible for commercial banks to provide brokerage services on corporate bonds in Vietnam?

Is it permissible for commercial banks to provide brokerage services on corporate bonds in Vietnam?

Pursuant to Clause 4 Article 14 of the Decree 153/2020/NĐ-CP (amended by Clause 11 Article 1 of the Decree 65/2022/NĐ-CP) stipulating as follows:

Issuance methods and related service providers

1. Corporate bonds shall be issued adopting the following methods:

a) Bidding: a method adopted to select investors that meet the issuer’s requirements to buy bonds.

b) Underwriting: a method of selling corporate bonds to investors through an underwriter or underwriter syndicate.

c) Brokerage: a method whereby an entity is authorized by the issuer to sell its corporate bonds to investors.

d) Selling bonds directly to investors if the issuer is a credit institution.

2. The issuer shall decide the issuance method to be adopted and notify it to investors.

3. Organizations in charge of identifying eligible investors:

a) The identification of professional investors shall comply with Clause 1 Article 8 of this Decree.

b) The issuer (when offering bonds) and the securities company (from which investors buy bonds in the secondary market) shall identify strategic investors according to the Resolution issued by the issuer’s GMS on selection of strategic investors in accordance with regulations of the Law on securities.

c) The organization in charge of identifying the investor’s capacity shall give its certification by signing the written certification which is made by the investor before buying bonds using the form in Appendix V enclosed herewith, and assume legal responsibility for its certification.

4. The following organizations may provide bidding, underwriting and brokerage services:

a) Securities companies shall be allowed to provide bidding, underwriting and brokerage services in accordance with regulations of the Law on securities;

b) Commercial banks and FBBs shall be allowed to provide brokerage services after obtaining permission from the SBV in accordance with regulations of the Law on Credit Institutions and certification of securities depository registration from the State Securities Commission of Vietnam (“SSC”) in accordance with regulations of the Law on securities.

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As regulations above, commercial banks shall be allowed to provide brokerage services after obtaining permission from the SBV in accordance with regulations of the Law on Credit Institutions and certification of securities depository registration from the State Securities Commission of Vietnam in accordance with regulations of the Law on securities.

Is it necessary to conclude a contract when brokerage services providing corporate bonds is in commitment to redeem corporate bonds with investors in Vietnam?

Pursuant to Clause 5 Article 14 of the Decree 153/2020/NĐ-CP (amended by Clause 11 Article 1 of the Decree 65/2022/NĐ-CP) stipulating as follows:

Issuance methods and related service providers

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5. When rendering services, bidding, underwriting and brokerage service providers shall discharge the following responsibilities:

a) The bidding, underwriting and brokerage service provider must enter into a service contract with the relevant issuer, in which rights and responsibilities of each party must be specified.

b) A bidding, underwriting and brokerage service provider, when distributing bonds, or the issuer that is a credit institution, when selling bonds directly to investors, shall:

- provide investors with adequate and accurate information according to the approved bond issuance plan and ensure that investors will not confuse the purchase of corporate bonds and making of deposits at the credit institution; provide investors with adequate and accurate information about responsibilities and obligations to be discharged by the bidding, underwriting and brokerage service provider when distributing bonds; not provide false information or information which may mislead investors about bonds to be offered to them;

- only distribute bonds to investors that have been identified as professional investors by the issuer or authorized securities company after they have accessed and adequately understood information and signed written certifications as prescribed in Article 8 of this Decree; not offer or assist investors that are ineligible to buy privately placed corporate bonds;

- in case of commitment to redeem corporate bonds, enter into contracts with investors (in which terms and conditions of bond redemption must be specified) and comply with specialized laws when fulfilling this commitment.

- in case of underwriting as prescribed in the Law on securities, provide investors with adequate information on scope of underwriting, and ensure that investors will not confuse underwriting with payment guarantee.

- make and send the written confirmation of transfer of funds raised from the bond offering to the issuer’s account to the issuer for its retention and disclosure of information on bond offering results as prescribed.

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As regulations above, in case of commitment to redeem corporate bonds, brokerage services providing corporate bonds enter into contracts with investors (in which terms and conditions of bond redemption must be specified) and comply with specialized laws when fulfilling this commitment.

What are responsibilities of corporate bond buyers in Vietnam?

Pursuant to Clause 2 Article 8 of the Decree 153/2020/NĐ-CP stipulating responsibilities of corporate bond buyers in Vietnam as follows:

- Fully access information disclosed by the issuer; have a thorough grasp of terms and conditions of bonds, and other commitments of the issuer before deciding to buy and trade bonds.

- Self-assess and assume responsibility for their investment decisions as well as incur any risks from the investment and trading in bonds. The State provides no guarantee that the issuer will make full and timely payment of bond principals and interests when they become due, and exercise other rights for bondholders.

- Clearly understand and comply with regulations on eligible bond buyers, purchase and trading of privately placed corporate bonds in accordance with regulations herein and relevant laws.

Best regards!