The Financial Supervisory Service is set to reprimand a local asset management firm and a brokerage house for incurring huge losses by conducting allegedly reckless investments in stocks last November.
The companies which faced regulatory punishment are Wise Asset and Hana Daetoo Securities. They were reportedly negligent in internal controlling, according to the FSS.
Though the FSS had planned to fine-tune the sanction level by convening a panel meeting last Thursday, the regulatory body delayed the process in a bid to further review the details.
Wise Asset suffered losses totaling 89 billion won ($79.4 million) from their investment activities on Nov. 11 when Deutsche Bank ― which has been under criminal investigation for stock manipulation ― dumped about 2 trillion won in shares on the Korea Exchange.
The benchmark KOSPI unexpectedly plunged 48 points in the last few minutes on the day due mainly to allegedly unfair trading of the Germany-based investment bank.
FSS inspectors have uncovered that Wise Asset engaged in careless betting which far surpassed the investment ceiling set by regulations and laws.
Market observers say the asset management company, whose equity capital stays at only about 10 billion won, has been on the verge of bankruptcy in the wake of the losses.
Hana Daetoo Securities also suffered similar losses after it paid a great portion (about 76 billion won) as a big broker ― on behalf of Wise Asset ― out of the 89 billion won betting of the small-sized asset management firm.
The FSS is considering halting operations of Wise Asset for several months and may order the company to dismiss its chief executive, according to sources.
Hana Daetoo apparently will be issued a warning or caution by the regulator and its CEO could also possibly be censured, sources said.
The severity of the sanctions, which will be proposed at the panel meeting of the FSS in the coming weeks, will be finalized during the later meeting of the senior decision-making panel Securities and Futures Commission.
By Kim Yon-se (firstname.lastname@example.org