FSS chief vows to tackle unfair trading practices in capital market

South Korea’s Financial Supervisory Service (FSS) Governor Lee Bok-hyun [Photo by Yonhap]

South Korea’s Financial Supervisory Service (FSS) Governor Lee Bok-hyun has expressed a strong determination to address the unfair trading practices occurring in the capital market.

The current list of suspicions under investigation by financial authorities includes allegations related to Kakao Corp.’s tender offer for SM Entertainment, unfair trading suspicions between SK Group and private equity fund (PEF) operator Alchemist Partners, and trading based on undisclosed information by securities firms’ analysts and employees.

On Monday, Governor Lee displayed confidence in uncovering the truth by saying that “(regarding Kakao’s SM takeover), we are focusing our efforts and conducting various data analyses and investigations, and the progress of the investigation is proceeding faster than expected.”

“We believe that (in addition to the Alchemist Partners case), there have been a number of recent cases where employees involved in their work should strive to secure financial trust, but by taking advantage of opportunities such as using undisclosed information, they are depriving consumers of benefits and undermining market trust, causing damage to the financial and economic sectors,” Lee further mentioned.

“We will respond strictly to those who are engaged in work related to market order as well as stock price unfairness, and in that sense, we have strict standards for asset managers’ misuse of funds and opportunities.”

Governor Lee also expressed his intention to impose the highest level of sanctions on those who disrupt the integrity of the capital market if any illegal activities are discovered. He emphasized that the authorities would cooperate with investigative agencies and take all possible measures.

Kakao has been under suspicion for allegedly acquiring a large stake at a significantly higher price compared to rival Hybe Co.’s tender offer to thwart Hybe’s potential acquisition of SM Entertainment. In response, Hybe submitted a letter to the FSS in April, requesting an investigation into abnormal stock purchases of SM shares by Kakao.

SBS reported that Alchemist Partners engaged in inappropriate transactions with SK Group during the process of acquiring semiconductor company Key Foundry in March.