Joyce Chang, The China Post
The closure of Wellphone Securities today have sent a shock wave through the already faltering stock market and aroused worries about the operation of Taiwan securities firms amid the sluggish economy.
In a statement filed with Taiwan Stock Exchange, Wellphone Securities said that it was suspending its business due to the fact that earnings were failing to cover its operational costs. The company’s liabilities have climbed to over NT$6 billion since 1991. In addition to its huge debt, the company is accused of financial malpractice, having allegedly embezzled NT$70 million from corporate bonds and short-term bills. The Securities and Futures Commission (SFC) has asked the judicial unit to restrict the company’s president Cheng Chien-chi from leaving the island. In order to protect the rights and interests of the company’s customers, the Taiwan Stock Exchange said that the company’s stock-transaction and credit-sales operations will be transferred to the Taiwan Securities Corp. The weakening stocks market has impacted heavily upon stock brokerage companies on the island. According to the SFC, 718 securities brokers have had to limit their business operations due to insufficient capital. These companies are expected to seek an increase in working capital in the near future in order to forestall unexpected operational accidents. Faced with shrinking stock transactions, the securities companies, Yuanta Core Pacific, Fubon and Jih Sun have called off their previous plan to merge with other brokerage companies. Under the worsening economic environment, many stock brokerage companies have said that they will lay off personnel to reduce operational costs. Wellphone Securities Corp was established in 1961 and was among the first generation of 14 securities brokerage companies on the island. It currently controls working capital of NT$500 million, with a workforce of 160 persons and separate affiliates in each of Taipei, Taichung, and Kaohsiung.