Within a few months a total of 3 small brokers have collapsed with misappropriation of client assets. Such incidents even happened during the current economic conditions. What's wrong?
Somebody commented that SFC should prohibit repledging of margin clients' securities. This is overshooting. In Wing Yip's case, all clients were cash account clients, but the owner simply stole their securities.
The beauty of small brokers is the personalized services (including "stock tipping"), but the clients are bearing the risk of theft of their assets. The ideal solution proposed by SFC is of course the opening of IP account or segregated account with statement service. But investors dislike such inconvenient arrangement. This is funny - you trust on somebody who is not so trustworthy, and then you blame the regulator for not protecting you!
Family-based or small brokers carry their own values. Why don't they concentrate on providing their niche services and "outsource" their back office functions to a centrally managed company? This independent company (formed by a union of small brokers) can afford appointing qualified compliance officers or auditors to monitor its operations. As a result, small brokers could lower their operational risk, then recovering the public confidence. This may even be a cost-saving proposal.
If the internal control problem of small brokers is not resolved, I can't believe that Wing Yip's owner is the last "bad guy".
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