Shinhan Securities CEO offers 'sincere apology' for $95 million ETF scandal

Shinhan Securities CEO Kim Sang-tae apologized for a 130 billion won futures trading scandal and pledged to implement emergency measures.

Shinhan Securities' headquarters in western Seoul [SHINHAN SECURITIES]

Shinhan Securities CEO Kim Sang-tae apologized and vowed to implement emergency measures following the exposure of a 130 billion won ($95.4 million) futures trading scandal.

“I would like to offer a sincere apology first and foremost,” Kim said an in internal message sent to the securities brokerage on Tuesday. Kim added that an emergency task force, launched that day, would look into the causes of the scandal.

Shinhan’s futures and options trading division, which handles liquidity provisions for exchange-traded funds (ETF), was involved in unauthorized futures trading that resulted in major losses on Aug. 5 when the Korean stock market took a record plunge triggered partly by U.S. recession fears. In order to cover up the loss, the division reportedly made additional transactions that worsened losses and submitted a false report of nonexistent swap transactions. That report was uncovered during quarterly closing on Oct. 10.

Shinhan Securities attributed an estimated loss of 130 billion won to unauthorized futures trading in an electronic disclosure filed Oct. 11.

The losses did not directly involve, nor will they affect, customer funds that are currently invested in ETF products, Shinhan said.

The Financial Supervisory Service (FSS) launched an on-site investigation of Shinhan Securities, as well as comprehensive inspections of the derivatives trading at 26 securities firms, on Monday.

Financial Services Commission Chairman Kim Byoung-hwan also called for a thorough investigation, saying the regulator would “thoroughly investigate the case and take necessary measures based on the results,” during a meeting of senior officials on Monday.

Credit rating agencies Korea Ratings and NICE Investors Service said that they were closely monitoring the situation in respective reports issued on Monday.

However, both agencies expect the incident’s impact on the firm’s creditworthiness to be limited.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]