Securities companies would be re-arranged and classified in a plan to restructure the stock market set up by the State Securities Commission SSC.
SSC is going to submit to the government the plan to restructure the stock market with the focus on restructuring securities companies. During the restructuring process, the weak companies which cannot satisfy the requirements would be eliminated from the market, after the watchdog agencies consider their financial capability, the operation performance and the capability to manage risks.
The watchdog agencies have decided to stop the depositing, temporarily stop the offset payment activities, temporarily stop the transactions of SME Securities Company and put the company’s shares under the special control. As such SMES shares now can be transacted on Friday.
The decision has been made after the watchdog agencies found out the company continuously violated the payment obligations as a member of the stock market, and made serious mistakes which led to serious losses to clients.
Besides, SMES has been forced to deal with the insolvency, pay back the principals and interests for the loans from the payment support fund, compensate clients and fulfill the necessary procedures, so that the clients can transfer their transaction accounts to other securities companies if they want
This is not for the first time SMES falls into the situation of losing the liquidity. The same situation once occurred one month ago.
Dr Le Dat Chi from the HCM City Economics University, said that in an effort to attract more clients, a lot of securities companies allowed investors to buy shares with the value far exceeding the sums of money they have on accounts. When securities investors do not have money to pay back to securities companies, the companies have to suffer. This explains why many securities have big accounts receivable.
He went on to say that when the stock price keeps decreasing, the demand is low, securities companies incur losses for a long time, the cash flow gets depleted, and the accounts receivable inevitably increase. There are two many securities companies, while the “market cake” is too small for all. Therefore, Chi said, it is a necessary thing to restructure the market and securities companies.
Nguyen Doan Hung, Deputy Chair of SSC, said that the restructuring of securities companies will be carried out based on the norms of the usable capital on the total risks and the ratios of the accumulative losses on the chartered capital.
Besides, Hung said that securities companies will be classified into three groups, including the group of normal companies, the group of companies that need to put under the control of the watchdog agency, and the group of companies to be put under the special control.
Currently, SSC is consulting with the members of the stock market on the issue.
It is expected that in the first three months of 2012, the quarterly reports on the financial targets of securities companies would be audited. SSC has had the list of more than 10 securities companies which have fallen into the status that does not allow to ensure the financial security.
Hung said that securities companies will have to satisfy the requirements set up by SSC, or they will have to leave the market. Especially, they will be asked to increase the chartered capital.
General Director of a securities company belonging to a bank, applauding the plan on restructuring, said that the restructuring, in long term, will make the market healthier.