Non-professional investors restricted from accessing private corporate bonds

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Mr Nguyen Hoang Duong, Deputy Director of Department for Banking and Financial Institutions (Ministry of Finance).

What does the state management agency expect from Decree 65, and how will the Decree create transparency for the state management agency and the issuers and investors?

The corporate bond market is a perfect medium and long-term capital mobilization channel for businesses to reduce dependence on bank credit channels. However, when the market showed signs of hot development, the Government had timely instructions to review the regulations. Accordingly, the Government has issued Decree 65/2022/ND-CP to enhance the transparency and publicity of the market and strengthen supervision and management over the corporate bond market.

For issuers, the Decree requires enterprises to disclose f information fully, honestly and transparently to investors.

Investors, investors must be professional investors. It means that they can analyze risks. Deliberately violating acts to become a professional investor and directly causing risks to investors will be handled. The new Decree has also added regulations to enhance the professionalism of investors.

For State management agencies, the Decree adds regulations to strengthen the responsibilities of state management agencies, including the Securities Depository Center, the Stock Exchange, the State Securities Commission, the Ministry of Finance and the State Bank, in the management and supervision of the corporate bond market. Shortly, the Minister of Finance will drastically direct the inspection of violations in the market.

Another point, according to the provisions of Decree 65/2022/ND-CP, a secondary trading market for privately issued corporate bonds will be established, and the investors, issuers and regulatory agencies State managers will have information on the secondary market to perform their duties and responsibilities.

Decree No. 65/2022/ND-CP does not have regulations that tighten corporate bond issuance, as recently reflected, but continues to create conditions for businesses to mobilize capital in the market, increasing transparency to protect both interests of investors and issuers. Therefore, I hope the corporate bond issuance channel will still be an effective capital mobilization channel for enterprises.

What are the differences between Decree 65/2022/ND-CP and the previous regulations for individual investors when participating in the market?

For investors, the most remarkable point in Decree 65/2022/ND-CP is the regulation on professional investors, defined by a portfolio of securities owned by the investor, and the portfolio is valued at VND 2 billion at least within 180 days. This VND2 billion is the real assets of investors, excluding the value of margin loans and the value of securities for trading. The adequate time for the determination of professional securities investor status by securities portfolio is valid for three months, after that, investors will re-determined

The Decree also stipulates that, when buying bonds, investors must read, understand and sign a document certifying that they have thoroughly read documents about the bonds they intend to buy and understand the law and accept risks on corporate bonds both in the primary and secondary markets. In addition, the information provider and the certifier of professional securities investors shall both sign and confirm that they have provided sufficient information and documents to investors. In particular, the Decree stipulates that investors are not allowed to sell or jointly contribute capital to invest in bonds with investors who are not professional securities investors.

Can the situation of circumventing the law to "become a professional securities investor after a day" be prevented by such regulations?

In the past, when monitoring the market, we find that one of the considerable risks of the market is that individual investors cannot analyze the market but deliberately become professional investors. To overcome this situation, Decree 65/2022/ND-CP adds the above regulations to increase the quality of professional investors and restrict non-professional investors from accessing privately placed corporate bonds, thereby reducing risks for the market.

Accordingly, the new regulation requires individual investors when buying bonds to prove that they are professional investors following the law. In addition, investors must also be more careful when signing a document confirming that they have full access to information of the issuer and that the document will be signed between the investor, the issuer and the certifier as mentioned above.

In addition, Decree No. 65/2022/ND-CP adds regulations on prohibiting investors who have purchased bonds to redistribute through investment contracts. This regulation comes from the fact that in the past time, investors purchased bonds through co-investment contracts with other investors and there have been risks in the market. Thus, it is illegal to invite investors who are not professional securities investors to buy bonds through capital contribution contracts/investment contracts.

Furthermore, to restrict non-professional investors from buying corporate bonds, the Decree also increases the face value of corporate bonds to VND 100 million/bond or a multiple of VND 100 million instead of VND100,000 and a multiple of VND100,000 as before.

Capital mobilisation through corporate bonds may decrease sharply The scale of capital mobilisation through corporate bonds is forecast to decrease sharply, but there will be ...

Thank you Sir!