Circular 68 on Pre-funding removal for foreign institutional investors.

The Ministry of Finance (MoF) issued Circular 68 to remove the prefunding requirement for foreign institutional investors ("investor"). This Circular was signed on 18 September and will be effective 2 November. 


Once implemented, FTSE will give their clients 3-6 months to test the process and simultaneously request feedback to ensure the process is efficient and sustainable. Based on this development, we believe FTSE could announce Vietnam's upgrade to Emerging Market status during either its March 2025 or September 2025 semi-annual market review session.


The Circular's key points include:

1. The securities company provides non-prefunding (NPF) trading quotas to each investor based on its risk management policy and agreement with the investor. 


2. If the investor fails to fully pay for the stock purchase transaction:

- The obligation to settle the transaction will be transferred to the respective securities company’s proprietary trading account; 

- The securities company can transfer these shares back to the investor by the end of T+3 (at the latest).  

- The transfer can be executed via put-through on the market or off-market transaction if the transfer price is outside the trading band or the transaction volume is smaller than the minimum put-through volume.

- If the investor refuses or is unable to repurchase the shares from the securities company (e.g., due to no available foreign room), the securities company will sell those shares on the market. Any losses, profits and other expenses arising from this transaction will be resolved according to the agreement between the securities company and the investor.


3. The securities company must disclose information regarding the investor who fails to repurchase the shares. This disclosure must be made on the information disclosure platforms of the State Securities Commission, Stock Exchanges, Vietnam Securities Depository & Clearing Corporation and the securities company within 24 hours from the time the investor failed to repurchase the shares.


4. The custodian bank is responsible for settling the failed trade and incurred expenses (if any) if it incorrectly confirms the investor's cash balance with the securities company.


5. The securities company is prohibited from providing NPF services on its own stock.

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