Vietnam: Stabilizing investments funds through better regulation and supervision

This project provided assistance to the State Securities Commission (SSC) for the development of the regulatory framework for supervising investment funds. As a direct result of the project, the SSC issued 3 core regulations. It was of significant value that the legal reform aspect was one strategic component of a highly-integrated TA delivery, which followed soon after the authorities’ preparation and adoption of the 2006 Securities Act. As such, the project was accompanied by strong ownership throughout by the SSC, which was key to its successful outcomes. Another component of the overall project was a preparation of a training curriculum to implement the regulations, thus ensuring their sustainability.

After the project was completed, the SSC stated directly that it was “the best donor supported project at the SSC to date.” The coherence of the legal drafting of the regulations and the institutional implementation led to highly sustainable results in the integrated regulatory framework. There was strong ownership from the SSC and the Ministry of Finance, which oversees SSC. The regulatory reform was complemented by a concurrent diagnostic assessment and the preparation of guidelines and training manuals for the SSC to help in implementing the regulatory framework. The project also benefitted from a clear objective for the strengthened regulatory framework – to improve the capacity of the SSC to regulate investment funds, their management companies and related service providers such as custodian banks.

As a result of the project, the SSC was able to create a new Department of Management of Investment Funds and Fund Management with its own dedicated staff, affording a greater prospect of sustainability of the regulatory reforms with a dedicated team. The authorities were also clearly focused from the outset to increase for long term investors in investment funds, such as pension funds, and deepen the capital markets in Vietnam. While the subsequent global financial crisis has slowed the growth of capital inflows to Vietnam’s markets, the framework established by SSC under the project has allowed for Vietnam to regulate investment funds so as to stabilize funds under management, and minimize capital outflows.