SME has back to wall as SSC looks to play tough

On February 8, Vietnam’s State Securities Commission (SSC) asked Vietnam Securities Depository (VSD) to revoke the securities depository operation registration certificate of SME Securities (SME). When SME is stripped of this certificate, it will no longer be able to access VSD services relating to registration, depository, clearing and settlement.

“Accordingly, VSD will, by February 22, close trading accounts at SME and transfer the accounts to other depository members if requested by relevant account holders,” VSD said on its website.
The Ho Chi Minh Stock Exchange (HoSE) and Hanoi Stock Exchange (HNX) responded to the SSC’s decision by announcing they would stop securities transactions of SME account holders and bar the opening of new SME accounts on the two bourses.

“The latest moves by SSC, HoSE and HNX is a further step towards shutting down further operations of SME by market regulators and SME’s business licence might be revoked,” said Nguyen Quang Hung, a lawyer with Vilaf Hong Duc law firm. SME chairman Phan Huy Chi was not available for comment.

Market observers said the threats of closure indicated a tougher stance on the part of market regulators after SME failed to make securities transactions for its clients because of insufficient cash and securities several times in 2011. VSD then suspended SME’s securities clearing and settlement operations.

In 2010, SME earned VND14 billion ($676,000) in pre-tax profit, down from VND22 billion ($1.1 million) in 2009. The firm is yet to release 2011’s business results. SME shares were banned from trading on the HNX since February 8 when they closed at VND1,100 a share, or 89 per cent lower than face value.  

Market regulators have stated the restructuring of stock market operations, particularly securities firms, is a key task this year. Financial safety and the payment ability of securities firms, particularly those backed up banks, state-run groups and insurance companies, will come under greater scrutiny.

Vietnam now has 105 securities firms, but the Vietnam Association of Financial Investors has asked relevant authorities to slash this number to around 25.