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Photo = Financial Supervisory Service |
[Alpha Biz= Reporter Kim Sangjin] The Financial Supervisory Service (FSS) has issued preliminary notices of sanctions to six securities firms involved in unhealthy business practices, specifically in what is known as "bond rolling" schemes. The final sanctions will be confirmed through deliberations by the FSS's sanctions review committee and the Securities and Futures Commission under the Financial Services Commission (FSC).
On September 12, the financial investment industry reported that the FSS had notified Mirae Asset Securities, Korea Investment & Securities, NH Investment & Securities, Kyobo Securities, Eugene Investment & Securities, and SK Securities of impending sanctions. These sanctions include partial suspension of their trust and wrap account operations. The sanctions review committee has convened to assess the severity of the penalties, which may also include measures against the CEOs of firms that have used their own capital for these investments. The FSS is expected to finalize the sanctions and forward the case to the FSC by the end of this month.
The FSS had been investigating the practices of these firms since last year, following allegations that nine securities firms used short-term funds from trust and wrap accounts to invest in long-term bonds, a practice known as "maturity mismatch." This practice was deemed unhealthy as it involved using funds from short-term investments to finance long-term bonds, leading to substantial liquidity issues when investors demanded large-scale redemptions amid the market crunch following the "Legoland incident" in September last year.
The firms involved have argued that their transactions were intended to provide market liquidity rather than cover losses. However, the FSS has rejected this justification and continues to pursue stringent penalties.
AlphaBIZ Kim SangJin(letyou@alphabiz.co.kr)
