HCMC – There is less than one month left for securities companies to begin buying occupational liability insurance and extract funds to protect investors as provided in a new Government decree. However, most brokers are still either confused with the new regulation or unprepared for implementation.
Confusion prevails
According to Point 18 of Decree 85/2010/ND-CP concerning administrative sanctions, securities firms will be fined VND50-70 million if they neither buy occupational liability insurance nor earmark enough funds for protecting investors as from September 20.
Almost all stock brokerages say they are confused and do not know how to execute the regulation due to lack of detail guidelines. However, buying occupational liability insurance is a need for enterprises involved in the securities sector and securities companies must do sooner or later.
Huynh Minh, deputy general director of Viet Capital Securities Co., says the company is in negotiations with foreign insurers to buy insurance for some of the company’s operations and that the deal is expected to be effective in one month’s time.
Nguyen Ngoc Truong Chinh, deputy general director of Golden Lotus Securities Co., says it is very hard for his company to follow the regulation as a guidance circular is not out. Buying occupational liability insurance for employees of a securities company is hard because insurers have no such a product in Vietnam, he notes.
If not buying this insurance, brokers must set up a fund for protecting investors but there is no guidance on how to set up the fund, extracting money from revenue or earnings, how to compensate, and how often to report on those funds, he adds.
The general director of another securities company says buying occupational liability insurance and establishing a fund to compensate investors’ losses are fair. However, there are not many choices for securities companies regarding fee levels or conditions for compensation.
He also says buying the insurance just is possible in a highly-developed securities market such as the U.S. and Japan where there are clear regulations and most investors make transactions via financial institutions.
Meanwhile, the Vietnamese stock market is young, 10 years old, and 80% of local investors are individuals who do not have a good understanding of laws and regulations. “Therefore, it is hard for securities companies to meet the requirement,” he says.
Insurers fumble
Many non-life insurers provide liability insurance for specific occupations such as construction consulting, legal advice and healthcare. However, there is no similar insurance product for the stock sector, a source of Bao Long Insurance Company says.
The source says Bao Long Insurance has been researching insurance products for brokerage operations for half a year but none has been in sight. The biggest difficulty faced by insurers is the general regulation for operations of securities companies and high risk for stock insurance.
In addition, there are not enough data to calculate risk for each securities operation. Therefore, it is hard to have a general regulation and specific price levels to find reinsurance companies, the source adds.
The leader of a non-life insurance company says the latest meeting of the Association of Vietnam Insurers raised an issue that members who had researched and deployed successfully products for the stock sector, should share experience with other members. However, no non-life insurers have launched such a product, the source says.
The source says that to develop products for the stock market, securities companies and non-life insurers must have common ground on the stock operations and insurance conditions.
Nguyen The Tho, head of the legal department of the State Securities Commission, says the stock market watchdog will issue a circular guiding the implementation of the decree on administrative sanctions against violations in the securities sector. But when remains unknown.
The Saigon Times Daily
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