For a long time, bonds have been deemed as a low-risk investment, helping to create a passive income source without causing the investors to worry too much about the stability of the investment capital. However, recently, the corporate bond market in Vietnam has gradually become unstable with scandals related to the bonds of some large enterprises, significantly affect the investment capital as well as investors' confidence in the stability of corporate bonds.

In order to "tighten" the bond market, on 16 September 2022, the Government issued Decree 65/2022/ND-CP providing amendments to Decree No. 153/2020/ND-CP prescribing private placement and trading of privately placed corporate bonds in domestic market and offering of corporate bonds in international market (“Decree 65”). Decree 65 immediately takes effect at the time it is issued. Accordingly, investors should note a few matters while deciding to spend money on bonds:

Notes for investors when buying bonds

Decree 65 requires the investors to sign a written confirmation that they (i) have fully accessed the information of the issuer, understands the relevant conditions, terms and commitments, (ii) have fully understood the risks arising and the regulations applicable to the investors and (iii) have assessed, and shall be responsible for their investment decisions and arising risks, recognized that the State will not guarantee that the issuer will make full and timely payment of the investors' bonds. This commitment applies when investors buy bonds both in the primary market (buying directly from the issuer) or in the secondary market (buying from other bond investors).

On the other hand, under the prevailing law, only professional investors can buy privately placed corporate bonds. Therefore, investors cannot buy this type of bond if they are not professional investors.

The investors are also not allowed to sell bonds to, or make joint investment in bonds with, investors that are not professional investors in any form. When reselling bonds in the secondary market, investors must also provide full disclosure of information about the issuer to the buyer. Conversely, when buying bonds from other investors, the buyer can also require the seller to provide all this information.

Violation of the above provisions may subject the investor to administrative penalties or criminal penalties depending on the extent of the violation.

The right to request enterprises to redeem bonds if they violate the "rules of the game"

To make the bond “playground” fair, Decree 65 has stipulated the obligation to redeem bonds of the issuer in case the issuer violates (i) the regulations on offering and trading corporate bonds or (ii) bond issuance plan.

Investors can request the issuer to redeem the bonds when such violations cannot be remedied, or the remedy is not approved by investors holding 65% of the total amount of such bonds.

When buying bonds, investors should pay attention to read the bond issuance plan carefully as well as research about relevant laws to ensure their maximum benefits when investing in this market. Thus, applying these regulations, bond investors can partly "retreat" and preserve their investment capital when noticing signs of violations from the issue.