Samsung Securities’ IB dream hits a snag due to pending court case of Samsung heir

2017.08.10 16:36:05 | 2017.08.10 16:36:58

Jay Y. Lee이미지 확대

Jay Y. Lee

South Korea’s Samsung Securities has hit a snag in its ambition to transform itself into a full-fledged investment banking entity as financial authorities have put off decision to grant a new business license until the court ruling on Jay Y. Lee, vice chairman of Samsung Electronics of whom state prosecution is seeking a 12-year prison term for bribery and embezzlement.

A final court verdict is scheduled to be delivered on August 25.

Samsung Securities said in a Thursday regulatory filing that the Financial Supervisory Service suspended a review of its licensing application for note-issuing business submitted last month because of a pending court case against its majority shareholder.

As of the end of March, the largest shareholder of Samsung Securities is Samsung Life Insurance with 29.39 percent. Lee does not own interest in Samsung Securities, but the largest shareholder of the insurer is Lee’s bedridden father with 20.76 percent and Lee himself is classified as a specially related person with a 0.06 percent stake in Samsung Life Insurance. Financial authorities interpreted Lee’s status as majority shareholder who could substantially affect Samsung Securities.

Samsung Securities이미지 확대

Samsung Securities

The review suspension represents a major drag to the stock brokerage attempting to transform it into a giant investment banking firm.

Peer companies such as Mirae Asset Daewoo Securities, NH Investment & Securities, KB Securities and Korea Investment & Securities are on track to become investment banking powerhouses with more than 4 trillion won in equity capital.

Under the license of note-issuing business, these firms can sell its own notes up to three times its equity capital, one of key channels for fundraising.

The current laws require financial authorities to resume reviewing five years after all sentenced time is served, meaning Samsung Securities might have to wait 17 years for the new business review if a 12-year jail term demanded by prosecutors is delivered.

By Chung Seok-woo

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