The Representative Board acts as a supervisory body responsible for overseeing the fund’s activities and protecting the interests of investors, but it does not directly manage the fund’s day-to-day investment operations. To become a member of the Representative Board, an individual must satisfy certain statutory requirements, particularly those applicable to independent members. Members of the Representative Board hold overarching supervisory authority but do not bear the same level of direct legal responsibility as the Fund Management Company (“FMC”). Nevertheless, they are required to comply with and fulfill their obligations in accordance with applicable laws and regulations.
1. Representative Board and Legal Requirements for Becoming a Member of the Representative Board
1.1. Representative Board
According to Article 109 Law on Securities 2019 (“LoS 2019”) and Article 19 of Circular 98/2020/ND-CP (“Circular 98”), the Representative Board serves as a body representing the interests of investors. It is elected by the General Meeting of Investors and acts on behalf of investors in overseeing the activities of the FMC with regard to particular funds. The Representative Board exercises its rights and performs its duties in accordance with the Fund Charter, including the approval of certain significant asset transactions, the endorsement of the valuation manual, and the determination of specific profit distribution plans as authorized by the General Meeting of Investors.
1.2. Requirements for a Member of the Representative Board
To become a member of the Representative Board, an individual must satisfy the following requirements:
(a) Must not be a minor; a person with restricted civil act capacity; a person who has lost civil act capacity; or a person with difficulties in cognition and behavioral control;
(b) Must not be a cadre, civil servant, or public employee;
(c) Must not be an officer, non-commissioned officer, professional soldier, defense worker, or defense public employee in agencies or units of the Vietnam People’s Army; or an officer, professional non-commissioned officer, or police worker in agencies or units of the Vietnam People’s Public Security.
(d) Must not be a managerial or executive officer in a state-owned enterprise;
(e) Must not be a person who is currently being prosecuted for criminal liability; being held in temporary detention; serving a prison sentence; undergoing compulsory administrative measures at a compulsory drug rehabilitation establishment or compulsory education institution; or being prohibited by a court from holding certain positions, practicing certain professions, or performing work related to investment funds;
(f) Possessing professional qualifications and experience in business administration or in the field of investment.
Additionally, the Representative Board must have at least 01 member with professional qualifications in law.
To become an independent member of the Representative Board, an individual must satisfy additional criteria as follows:
(a) Must not be a related person of the fund management company or the supervisory bank ;
(b) Must not have served as a member of the Representative Board of the fund for at least five consecutive years immediately preceding the appointment (except where such individual has been appointed for two consecutive terms) .
Moreover, the Representative Board must include:
(a) At least 01 independent member possessing professional qualifications and experience in accounting or auditing; and
(b) At least 01 independent member possessing professional qualifications and experience in securities investment analysis or asset management.
The composition of the Representative Board of a member fund is not required to follow the above structure.
2. Rights and Obligations of Representative Board
2.1. Right of Representative Board
1 Power of approval
The Representative Board shall have the power to approve detailed implementation guidelines, including:
(a) Approval of the Fund’s Net Asset Value (NAV) valuation manual; the list of price-providing organizations and credit institutions;
(b) Approval of the asset classes in which the investment fund invests.
2 Power to Approve Special Transactions and Other Matters
For asset transactions conducted via the negotiation method (excluding transactions on the Stock Exchange system), the FMC must obtain written approval from the Fund’s Representative Board prior to execution. Specifically:
(a) Contents requiring approval from the Representative Board: expected price range; timing or execution period; transaction counterparty or criteria for identifying the counterparty; and type of transaction assets;
(b) Transactions involving deposit contracts and certificates of deposit shall only be executed within a period of 03 months from the date of approval by the Fund’s Representative Board
(c) In cases where the actual purchase price is higher or the actual selling price is lower than the reference price provided by price-providing organizations, or exceeds the approved price range, the FMC must provide a clear explanation for the Fund’s Representative Board’s review and decision.
3 Power to convene the extraordinary General Meeting of Investors
The Representative Board shall have the power to request or directly convene an extraordinary General Meeting of Investors in the following cases:
(a) When deemed necessary for the interests of the Fund;
(b) (When the FMC fails to convene a meeting as prescribed (acting in place of the FMC to convene the meeting).
4 Power to request information
The Representative Board shall have the right to request the FMC and the Supervisory Bank to promptly and fully provide all documents and information regarding fund management and supervision activities for the performance of its duties.
5 Power to supervise the determination of the Fund’s Net Asset Value
For assets including listed securities and securities registered for trading, the prices of such securities shall be the closing prices or the average prices of the nearest trading day prior to the valuation date. For securities with no transactions for more than 15 days as of the valuation date, or for assets other than those mentioned above, the valuation shall be based on the procedures and methods specified in the Charter of the securities investment fund. Such valuation procedures and methods must be approved by the Representative Board of the securities investment fund.
In addition, for each specific type of fund, the Representative Board shall have the following additional powers:
(a) Open-ended Fund
Open-ended funds allow investors to withdraw capital (redeem fund units) at any time. Accordingly, the FMC shall, on behalf of the open-ended fund, repurchase fund units at the frequency and intervals stipulated in the Fund Charter. This mechanism may result in the dilution of the asset value for remaining investors if the fund is forced to liquidate assets for payment.
Consequently, in instances of extreme market volatility or abnormally large redemption orders, the Representative Board (if authorized by the GMI) shall have the power to apply liquidity defense measures.
This decision permits the adjustment of fund unit subscription and redemption prices to reflect actual transaction costs, ensuring that redeeming investors bear the liquidity costs rather than shifting the burden to the fund.
(b) Close-ended Fund
For closed-ended funds, particularly infrastructure bond funds, the investment portfolio typically comprises illiquid assets with long-term tenors (PPP project bonds, energy, and transportation):
(i) Approval of the target portfolio: The Representative Board participates in defining and approving the selection criteria for infrastructure projects. The Representative Board is empowered to represent investors’ interests, approve the valuation manual, the list of price-providing organizations and credit institutions, and approve negotiated transactions. Furthermore, the infrastructure bond fund’s investment portfolio must align with the investment objectives and policies set forth in the Fund Charter and the Prospectus. The Representative Board must ensure that selected projects comply with the Prospectus and the Fund Charter;
(ii) Investment limits: Circular 136 clearly stipulates the investment limits for infrastructure bond funds and the FMC’s obligations regarding reporting, information disclosure, and rebalancing the investment structure upon exceeding such limits.
2.2. Obligations of the Representative Board
(a) Protection of investors’ interests: (i) The Representative Board shall perform their duties honestly and with due care for the best interests of the Fund and investors ; (ii) Upon detecting that the FMC has violated legal regulations or the Fund Charter, The Representative Board shall be responsible for requesting the FMC to cease such violations and remedy the consequences.
(b) Reporting obligations: The Representative Board shall report on its operations and evaluate the FMC’s management effectiveness at the Annual General Meeting of Investors.
3. Rights and Obligations of Members of Representative Board
3.1. Rights of Members of Representative Board
Members of the Representative Board shall have the right to request the FMC and the Supervisory Bank to promptly and fully provide all documents and information regarding fund management and supervision activities. Furthermore, such members are entitled to information request rights equivalent to those of Board of Directors members of a listed company and as set forth in the Fund Charter; specifically, they have the power to proactively request and be provided with the information necessary to perform their supervisory functions and to evaluate the compliance and effectiveness of the fund management.
3.2. Obligations of Members of Representative Board
(a) Duty of honesty and protection of investors’ rights and interests:
Members of The Representative Board shall perform their duties honestly and with due care for the best interests of the Fund; they are prohibited from delegating their rights, obligations, or responsibilities toward the Fund to any other person.
(b) Supervision of conflicts of interest:
Members of the Representative Board shall have the duty to disclose and update their related interests; the duty of loyalty; and the prohibition against abusing their position/office or utilizing information and business opportunities for personal gain. In cases where a related interest exists, such member shall have no voting rights regarding the relevant matters or transactions.
The disclosure of related interests as prescribed, and updates thereof upon any change, shall include:
(i) Information on enterprises owned, co-owned, or in which the member holds capital/shares, including: enterprise name, enterprise code, head office address, business lines; ownership ratio, and the date of commencement of ownership;
(ii) Information on enterprises in which the member’s related persons own, co-own, or individually hold 10% or more of the charter capital, including the same enterprise identification information as mentioned above.
The disclosure must be performed within 07 working days from the date the related interest arises; any amendments or supplements must be notified within 07 working days from the date of such corresponding amendment or supplement.
(c) Information Confidentiality and Integrity: Members are prohibited from utilizing inside information for the trading of securities; and from disclosing, providing inside information, or advising others to trade securities based on such inside information. Furthermore, the duty of loyalty encompasses the obligation to refrain from abusing one’s position and information for personal gain.
(d) Maintenance of independent status: Independent members shall not be related persons of the FMC or the Supervisory Bank, nor authorized representatives of such organizations. In the event the aforementioned composition no longer satisfies the prescribed conditions, any member losing their independent status must immediately notify The Representative Board.
(e) Attendance at meetings and recording of opinions: Members shall attend all meetings, with a minimum frequency of once per quarter (or provide their vote in writing in the event of a justified absence), and must require that their individual voting stance (approval, disapproval, or abstention) be explicitly recorded in the meeting minutes .
In addition, members of the Board of Representatives are internal persons/insiders of the public fund. Pursuant to Clause 1, Article 33 of Circular 96, internal persons of a public fund and their related persons must report and disclose information before and after trading fund certificates when the expected transaction value is VND 50 million or more per day, or VND 200 million or more per month. Reports must be submitted to the State Securities Commission, the Stock Exchange, and the fund management company, including transactions performed outside the trading system (such as gifts, inheritance, or transfers). Accordingly, members of the Board of Representatives must disclose information and report to the State Securities Commission and the Stock Exchange before and after trading fund certificates when the expected transaction value is VND 50 million or more per day, or VND 200 million or more per month.
If a member of the Board of Representatives does not trade fund certificates but only purchases Stock X (issued by Company X), even if Stock X is included in the fund’s portfolio, no public information disclosure obligation arises under the ‘fund’s internal person trading’ mechanism specified in Article 33 of Circular 96.
