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Brokerage executives arrested for alleged fraud

Update: August, 09/2012 - 09:52

HA NOI — The recent arrest of two senior executives of SME Securities Co for alleged fraud has set off alarm bells about risk management practices at stock brokerages.

Last Thursday, police detained SME chairman and CEO Phan Huy Chi and vice chairman Pham Minh Tuan for appropriating almost VND57 billion (US$2.7 million) from PetroVietnam Insurance Company (PVI).

SME Securities Co reported to the State Securities Commission that authorities were investigating "the appropriation of property during the process of signing and implementing investment co-operation contracts with PetroVietnam Insurance Co (PVI)."

According to inquiries made by the newspaper Cong an Nhan dan (People's Police) back in April 2010, PVI signed a contract worth VND168 billion ($8 million) with SME Securities and Hoang Ngoc Anh, an individual investor, who would handle securities investments for PVI with a guaranteed annual return of 13 per cent.

PVI also signed a contract with Anh Consulting Joint Stock Co, setting up a fund of VND59 billion ($2.8 million) for securities investments.

PVI transferred a total of VND108 billion ($5.1 million) to implement the two contracts. Under both contracts, SME Securities was responsible for providing information to the relevant parties.

However, police found out that SME Securities had provided false information since Hoang Ngoc Anh was not a stock investor and his signature on the contracts and other relevant documents was forged. Meanwhile, Anh Consulting Co was an SME Securities Co affiliate and the contract was alledgedly signed under instructions from Tuan.

A year later, when the contract expired, SME Securities paid PVI only VND65 billion ($3.1 million) and remained indebted to PVI in the amount of VND57 billion ($2.7 million), both principal and interest.

In its latest financial report from the third quarter of last year, SME Securities posted an accumulated loss for the year of almost VND23 billion ($1.1 million). Its capital had eroded from VND225 billion (10.7 million) to VND203.5 billion ($9.7 million), while short-term receivables totalled VND593 billion ($28.2 million). — VNS

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