FSS to reprimand major brokerages in Korea for weak control

2019.06.07 12:13:56 | 2019.06.07 12:14:40

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South Korea’s Financial Supervisory Service decided to take disciplinary measures against the country’s major brokerage firms and the Korea Securities Depository (KSD) for lax control on overseas stock trading systems.

The financial watchdog conducted an investigation on 17 securities companies and found out 10 or more firms including Korea Investment & Securities, Samsung Securities, NH Investment & Securities and Mirae Asset Daewoo had many loopholes in their foreign stock transaction systems, according to industry sources on Thursday.

The probe came after a severe blunder committed by Eugene Investment & Securities Co. in May when the local brokerage house mistakenly quadrupled the price of an overseas stock after a 1 for 4 reverse stock split. The company only reflected the raised price and did not change the number of shares, causing a client to unfairly profiteer from the incident.

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The FSS held a disciplinary committee on May 30 that approved to impose fines on the brokerage houses found to have poor internal control that could result in failures in detecting serious problems such as dividend errors or naked short-selling. The measures will be confirmed as early as within this month.

The sale and management of overseas equities by local brokerages has drawn the FSS’s closer scrutiny as Korean investors have been increasingly turning to offshore assets. The purchase of overseas stocks by Korean investors reached $11.2 billion as of June 3, already exceeding last year’s total investment worth $9.8 billion.

By Jin Young-tae and Choi Mira

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