Many stock investors are facing the risk of losing all their money as securities companies "” after illegally using funds deposited by clients "” are stuck in liquidity problems.
Economist Dinh The Hien said a lot of stock brokerages have acted like small banks. Although they are not allowed to, the companies continue to keep the money that stock traders put into their accounts, which Hien described as a "risky" practice.
The companies have used the funds to provide financial leverage for other traders, trying to attract as many clients as possible. When leveraged traders incur losses and other investors want to withdraw their money, the brokerages immediately face liquidity problems.
The Vietnam Securities Depository last month issued a warning to Trang An Securities JSC, which became temporarily insolvent.
The agency also suspended securities clearing and settlement operations of SME Securities Corp. because the company has frequently violated settlement obligations. On Tuesday, many traders could not withdraw money from their accounts at SME and were asked to wait for several weeks.
Hien said the liquidity crisis can spread to other firms, raising safety concerns for the whole market.
He said the authorities are the first to blame for the situation because they were not aggressive enough in preventing securities firm from illegally keeping and misusing their clients' money.
It's urgent to put an end to this practice, he said.
The State Securities Commission has announced plans to restructure the stock market.
Economist Le Dat Chi said brokerages have to be completely banned from dealing with money issues and all payments need to be made via banks.
Chi said there are 105 securities firms and the number has to be cut down. "A housecleaning has to be conducted to make the market healthier," he said.