Who pays interest rate on stock investors' account balance?

Wednesday, April 23, 2008
Under the Decision No 27/2007/QD-BTC dated April 4, 2007, from March 1 this year stock brokerages will have to transfer deposits of securities transaction of stock players to an assigned commercial bank instead of direct receive like previous.
But on April 14, the State Securities Commission released the Official Letter No 611/UBCK-QLPH extending the deadline of March 1 to before October 1, 2008 because factually, to date only nine companies have completed the assignment.
However, investors now wonder whether they con continue receiving interests from balance of their securities accounts any more and who pays, stock broker or bank?
In line with the appendix of Decision No 27, stock brokerages will negotiate about interest rate based on securities accounts that investors opened at those brokers. Therefore, there has not been any official regulation yet so brokers will not have to pay interest rate for balance of stock investors' accounts. Secondly, interest rate negotiations between investors and securities companies are allowed so if without negotiation or negotiated interest rate of 0%, no law can be enforced in those cases. Thirdly, there is no regulation forcing securities companies to pay interest rate for balance of stock investors' accounts under the current Law on Securities and there is not any punishment.
Another point of view is that the interest rate payment responsibility is absolute.
It is seemed that the first opinion is more logical so the payment of interest rate to stock investors depends on securities companies.
Although not allowed to directly receive deposits of securities transaction from investors, Decision 27 still stipulates that stock brokers' monitoring on deposits must be separated from their own money. This means that brokers are allowed to continue managing customers' money. Therefore, investors have to open bank accounts that must be linked with securities accounts. As investors offer investment orders, securities companies will blockade directly balance of investors' securities accounts to carry out orders. In this case, banks will have to pay interest rate for investors' account balance because investors' money is kept at banks. In fact, fewer stockbrokers and banks can do this due to technological disadvantages.
On the other hand, stockbrokers only need to transfer the sending and withdrawal of investors' money to banks. In this case, securities companies still manage investors' money so they have responsibility to pay interest rate for account balance to investors. This solution was selected by most brokers.
So the question whether will stock players receive interest rate for their account balance or not will base on contracts. Investors should focus on interest rates on account balance carefully and cautiously before signing to open accounts at banks and securities companies. (DTCK)