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Hanoi OTC market chaotic on VND32bil in unpaid shares   2009-05-07 - VNE

Several tens of investors who sold Military Bank (MB) shares on May 5 have not received money since they transferred the shares to the buyer’s account. And this just after a freelance broker in HCM City disappeared with 30 billion in debts.


A lot of investors yesterday gathered at MB’s office for shareholders and share management at No 16 Lieu Giai street in Hanoi to get more information about the MB purchase deal.


An investor who was present there related that on May 5, a person agreed to purchase 1.5mil MB shares worth VND32bil, but he did not pay the brokers.


Like other transactions on the OTC market, the deal was carried out based on confidence among brokers. It always happens that sellers give shares first, and then get payment, with no contract signed. If wanting to purchase shares, clients just have to make calls or make transactions with handwritten papers, while they don’t have to pay immediately and don’t have to pay a deposit.


On May 6, the tens of investors asked the Military Bank to protect their benefits by blockading the 1.5mil shares.


Nguyen Thi Ngoc, Chief Secretariat of the MB Office of Board of Directors, has confirmed that some investors sold MB shares but have not got paid.


“MB has blockaded all the shares traded on May 5, while relevant agencies have started investigating the case,” Ngoc said. The investor who registered to buy 1.5mil shares but did not make payment has been summoned by the investigation agencies.


In principle, investors can make share transactions at OTC divisions of securities companies. However, in general, investors only complete formalities to transfer the ownership of the shares, while the sellers and buyers negotiate themselves about payment methods.


MB and some other banks use the method of ‘order for payment’, under which investors open accounts at the banks. When transactions are made, shares and money are transferred into investors’ accounts. However, according to Ngoc, not many investors choose this payment method, which is considered safe.


A similar case occurred two weeks ago in HCM City. A well-known OTC share freelance broker disappeared with VND30bil in debts.


A lot of insolvency cases on the OTC market have occurred due to the loose transaction regulations.


One of the people most talked about by investors on the OTC market is Hang. Hang has 3 years of market experience and she mostly trades MB shares because the share item proves to have high liquidity and remains the hottest item on the OTC market.


Huu Thang, a broker at DDS, related that Hang always makes big transactions, sometimes several tens of millions of shares. One time, Hang offered to sell 1mil MB shares at VND14,000/share with delivery in one week. When Hang had to deliver shares to buyers, the MB share price unexpectedly soared to VND17,000. This forced Hang to collect shares on the market at VND17,000 to deliver shares to buyers, incurring the loss of VND3bil.


Nguyen Son, Head of the Market Development Division under the State Securities Commission (SSC), said that the risks of the OTC market will decrease once the UpCom market becomes operational. On the market, investors must have accounts and money in bank accounts to be eligible to make transactions. However, Son admits that UpCom will not have enough room for several thousand share items.

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