The incident that the president of Ha Thanh Securities Joint Stock Company absconded after defaulting on nearly VND100 billion is raising an alarm to the security of assets (money and equities) of investors although none has raised their voice to the illegal appropriation of their assets.
The Vietnam Financial Investors Association (VAFI) said, nearly two years ago, it proposed the Ministry of Finance (MoF) and the State Securities Commission (SSC) necessarily set up a fund in consideration of investors in case their assets are illegally appropriated by some employees working at securities brokerage companies. However, the SSC did not take this into account. In addition, it delayed allowing one investor to open more than one trading accounts in different securities companies to spread risks and did not separate deposits of investors from their securities trading accounts.
Currently, the newly enacted Circular 74 allows one investor to open many accounts at different securities companies. According to the VAFI, investors should choose securities companies with strong financial resources and good corporate governance to open their accounts.
The VAFI said securities brokerage houses, especially small ones, should boost up transparency of their financial situation and bolster the confidence of investors by guiding them to open trading accounts at partner banks. This is a measure for securities companies to enhance their risk management.
New or inexperienced or time-poor investors should open multiple accounts, according to the VAFI. The more accounts they have, the less risk they may encounter because they can spread risks to the least degree.
“Investors should also understand that deposit accounts and securities accounts opened at securities companies are not guaranteed of their assets by the State as those at banks where deposit accounts are guaranteed by the State even when banks fall into the state of dissolution, bankruptcy and lose all equity,” VAFI analysed.
Allowing one investor to open more than one trading accounts meets requirements of foreign investors who set them forth more than five years ago because this mechanism helps them: keep their portfolios relatively secret, keep their buying/selling behaviours more secret, and minimise insider trading behaviours.
According to the VAFI, the SSC essentially takes into account the formation of a mechanism that helps protect investors’ assets more effective, particularly the investor asset compensation fund. If this mechanism is not applied, the SSC chairman will be liable for any loss of investors arising from behaviours of employees at securities.
To prepare for the deployment of multiple account mechanism, the Vietnam Securities Depository (VSD) should coordinate closely with securities companies to establish investor information criteria and correct information to create a consistent investor list (in terms of information) to lay the ground for totalling up, managing data and help investors to receive information from listed companies.
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