Sacombank Securities suspected of misleading shareholders as losses mount

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Sacombank Securities JSC, one of Vietnam's five largest brokerages, has been accused of hiding losses over the past few years, leading to a huge cumulative loss of VND1.4 trillion (US$68.4 million) as of the end of March.

The Ho Chi Minh City-based company, known as SBS, surprised the market at the end of 2010 with a profit or more than VND101.2 billion, paying a dividend of 6 percent to its shareholders despite the poor performance of the stock market as a whole.

But now, amidst a recovery of the stock market, with the benchmark VN-Index one of Asia's best performers, it has posted the biggest loss among the 700 listed companies in Vietnam. The cumulative figure included losses of nearly VND800 billion made in the first quarter. That compared to its registered capital of VND1.2 trillion.

SBS shares have fallen sharply from VND34,000 at the end of 2010 to VND3,900 last Friday, which translates to a 90 percent loss for shareholders.

Its officials have said that the company faced many difficulties last year as the market declined while operational costs increased. According to news website VnExpress, Sacombank cut its ownership at SBS to 11 percent last year from 56.4 percent.

Analysts, however, said it was unusual for a company to post huge losses in a short time, putting shareholders at the risk of losing all their money.

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Economist Dinh The Hien said if the management board of a company tried to cover up losses on purpose, it would be very difficult spot. Companies can do so by simply reducing financial reserves or selling their assets to increase their cash inflows and then making repurchases later.

Lawyer Tran Minh Hai said SBS shareholders can file a lawsuit and seek compensation if the company does not come up with resonable explanations.

Responding to the accsuations, SBS announced Friday that it has hired Ernst & Young to undertake an audit. Results are expected to be announced in two months.

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