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OTC market: Tightened control will help?   2009-05-21 - DTCK

Scandals that have happened in the OTC market recently have made people think it is necessary to tighten control over the market.


Most recently, the State Securities Commission SSC asked securities companies to report about the operations of OTC trading floors set up and run by the companies

Most recently, the State Securities Commission SSC asked securities companies to report about the operations of OTC trading floors set up and run by the companies. Reports on risk management procedures have also been asked for.


However, to date, the watchdog agency has not released any official information suggesting it will interfere in the OTC market though there have been a series of scandals. Meanwhile, investors have been whispering in each others’ ears that drastic measures will be applied to tighten control over the market.


The noteworthy thing is that SSC is planning to put UpCom into operation in June. This is one reason why investors have been saying this.


The recent scandal on the OTC market, in which a buyer did not make payment for the purchase of 1.5 million shares of Military Bank, reported on by all local newspapers, has made many investors afraid of the market.


However, Huy Nam, a securities expert, said that risks are quite normal in the market, and that things should not be made out to be more serious than they are.


“The real estate market and other markets sometimes see more serious cases than that of the 1.5 million shares,” Nam said.


Dau tu’s reporters found out that nearly all investors involved in the case of the 1.5 million Military Bank shares were experienced investors. Therefore, it cannot be said that the buyer of the 1.5 million shares took advantage of the ignorance of the investors.


Nam said that transactions on the OTC market should be seen as normal civil transactions, in which involved parties understand and accept possible risks. Once they accept the rules, they have to take responsibility for their actions.


Pham Thi Yen, an experienced investor in the OTC market, said that if government management agencies issue any unreasonable regulations to interfere in the OTC market, they could paralyse the market.


The UpCom market is going to become operational in the coming time, but experts believe that it will take a long time for it to become a replacement for the OTC market. In the meantime, several thousand businesses and several million shareholders who need to transfer shares will still rely on the OTC market.


And it is clear that the risks in the OTC market, though they are big, would not be bigger than the risks that would be brought about if the OTC market became paralysed.


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