The economic crimes police recently arrested a woman and a man for allegedly defrauding securities and insurance companies and stock traders out of more than VND5 trillion (US$240 million), setting off alarm bells at oversight agencies.
Last week they arrested Vo Anh Tuan, former deputy head of Vietinbank's Nha Be Branch in HCM City, and had earlier taken in Huynh Thi Huyen Nhu, a former colleague and former executive at ORS, the securities affiliate of the Orient Commercial Joint Stock Bank.
Preliminary investigation showed that Nhu colluded with Tuan and other banking and securities employees to fake seals and investment and money-deposit contracts to get the companies to transfer money to designated accounts.
Nhu also mobilised a large amount of money from individuals offering a scarcely believable 7 per cent interest a month.
She reportedly persuaded them by showing investment contracts and real estate documents purportedly given as collateral.
The police have identified no less than 10 institutions and individuals who fell prey, and more are reportedly turning up to make complaints.
Pham Hong Son, director of the Securities Business Management Department at the State Securities Commission, said the watchdog had strengthened monitoring and inspection of securities companies, applying measures to make them safer.
"Fines were slapped on many of them for violating securities and securities market regulations," he said.
The measures include mandatory information disclosure, reports, employee management, securities trading and trading history files of customers, and internal inspections.
"Since early April, securities companies have been required to implement financial safety regulations so that they can identify risks, their causes, and scale so that they can themselves assess their risk levels and adjust their operations," Son said.
The SSC also supervised securities companies by poring over their annual audited reports, six-month financial reports, and others, he said.
It was actively co-ordinating with the police to get information about the scam and would soon inform investors and the public, he said.
Hoang Thach Lan, brokerage director of MHBS, Mekong Housing Bank's securities arm, said a number of securities firms, in their impatience to increase market share, had unofficially offered margin services – or loans to buy securities – to big customers.
"The credit line to these VIP customers is often high and the customers enjoy preferences like low collateral rate, delayed payment, and even cash withdrawal, so the risk to the securities companies is very high," he said.
Now margin services, which will help develop the market, have been made legal for securities companies than can satisfy financial-safety and risk-management requirements.
"For the SSC, sufficient information about the market will be of great help in reducing risks caused by the margin service," he said.
"The stock market always has two factors – investment and speculation. If every investor buys shares as an investment and does not sell, the situation cannot be sustained for long. Speculation is a promoting factor and it needs financial leverage like margin trading.
"Developed markets employ various derivatives like short selling (traders borrow securities from brokers to sell them, expecting the price to drop), but it has not been allowed yet in Viet Nam."
Though illegal, many brokerages do allow clients to go short.