Nguyen Thanh Ky, Secretary General of the Vietnam
Association of Securities Businesses (VASB), has released a figure
which may startle investors: 70% of operational securities companies
have been operating perfunctorily with manpower and operation cuts.
The question is naturally raised: As far as investors
who have assets (stocks and money) deposited at securities companies,
who would protect them if those companies went bankrupt?


Prior to October 1, 2008, securities investors opened
accounts at securities companies, which meant that securities companies
managed their money. However, the State Securities Commission (SSC)
decided that as of October 1, 2008, investors’ money would be under the
management of commercial banks instead of securities companies, which,
according to SSC, would ensure the safety of investors’ money.


However, to date, only 10 securities companies have
completed the process of transferring investors’ money to banks for
management.


What about stocks? Phuong Hoang Lan Phuong, Director
of the Stock Depository Centre, said that Vietnam is applying the
two-level stock depository scheme. Under the scheme, securities
investors open accounts and deposit stocks at companies which are
depository centre members. The member companies then re-deposit their
clients’ stocks at the depository centre.


As such, the depository centre does not keep detailed
data about the securities ownership of investors, it just keeps the
general stock figures of every member company. It is clear that with
that scheme, neither the money nor stocks of investors are being
managed independently of securities companies’ assets.


Article No 71 of the Securities Law stipulates that
securities companies have to have professional liability insurance or
have a fund to compensate investors for damages caused by mistakes of
securities companies’ staffs. Meanwhile, the regulations on the
structure and operations of securities companies stipulate that if
closing down, securities companies have to have solutions to deal with
valid contracts, ensuring the benefits of investors.


However, in fact, not many securities companies have
taken out professional liability insurance, simply because they don’t
want to pay for it. Meanwhile, insurance companies still hesitate to
provide the service in Vietnam as they think it is very risky and
unfamiliar.


In 2000, Bao Viet planned to provide liablility
insurance for the stock market. However, the plan has not been
implemented, for many reasons.


In 2007, when the stock market witnessed hot
development, Gras Savoye Willis Vietnam launched several stock-related
insurance products. According to the insurer, many investment funds in
Vietnam, namely VinaCapital, Dragon Capital, Mekong Capital or
Indochina Capital, have used their services, but very few securities
companies have.


A Dau tu chung khoan newspaper reporter has found out
that only one securities company has used a service provided by the
insurer for one year. However, the company is going to stop using the
service due to unsuitable provisions. The director of the securities
company said that many other companies do not have insurance policies,
and they have not been punished for this.


The problem lies in the fact that there is no concrete
provision which clearly stipulates how to deal with bankrupt securities
companies which are uninsured. And the question still remains
unanswered: Who will protect investors’ interests?