Tong Yang Securities CEO Jeong Jin-seok was found to have pushed forth a voluntary business suspension in a low-key manner, which is inviting mounting criticism in the financial market.
Though his attempt failed in the face of skepticism from financial regulators and the company’s executives, the chief of the embattled Tong Yang Group’s brokerage unit had sought to halt operations before the conglomerates’ five units filed for court receivership earlier this week, according to industry sources on Friday.
The union of Tong Yang Securities reproached the CEO’s practice, adding that it would file a complaint against Jeong and Tong Yang Group chairman Hyun Jae-hyun with the prosecution next week.
Over the past week, Hyun and Jeong have been heavily criticized for allegedly pressuring the brokerage employees to aggressively sell commercial paper and corporate bonds issued by Tong Yang’s debt-saddled nonfinancial units.
“The owners appear to have tried to avert their private losses by suspending the brokerage unit in advance,” a research analyst said. “It could be regarded as an ethical breach.”
Further, the Tong Yang union has revealed that group vice chairwoman Lee Hye-kyung, who is also the wife of chairman Hyun, pulled a huge deposit out of her account at the securities firm’s headquarters in downtown Seoul on Oct. 2.
Market insiders and the political sector are raising the possibility that the conglomerate’s brokerage unit had pushed for the sale of its sister firms’ bond and CP products without informing individuals of the investment risks.
The Democratic Party alleged that the group exploited customers by selling the high-risk CP and bonds through its brokerage channels “in an effort to make up for the liquidity crises of some nonfinancial units.”
Earlier this week, the group’s five nonfinancial units, including the holding firm Tong Yang Inc. filed for court receivership, as part of chairman Hyun’s alleged effort to prevent a default on maturing bills worth some 1 trillion won ($909 million).
According to data compiled by the FSS, about 46,000 retail investors are assumed to have suffered collective losses of an estimated 2.3 trillion won.
