The Financial Supervisory Service said on Tuesday that it accepted a petition by 600 retail investors requesting the financial authority to investigate the cash-strapped Tong Yang Group and its financial units.
This marks the first time the FSS has taken a collective request by individuals for a probe into a conglomerate.
FSS chief Choi Soo-hyun suggested such a system benchmarking that of Korea’s Board of Audit and Inspection upon his inauguration last March.
“A significant number of investors have filed claims against (Tong Yang Securities’) illicit bond underwriting, reporting losses,” the FSS said in a statement, adding that it had to determine whether Tong Yang Securities carried out such actions and unfairly introduced those bonds to its customers.
“Given that the buyers of the controversial Tong Yang bonds are retail investors, we concluded that the collective investigative request should be executed,” it added.
A minimum of 200 people claiming unwarranted damages from the same financial instruments need to file a request as a group to the FSS for an official investigation against a particular financial company.
The is in line with the Park Geun-hye administration’s policy to increase individual investor protection.
Such a policy of collective request for an investigative action had not been implemented before as none of the requests gained the approval of the FSS evaluation committee consisting of three FSS high-ranking officials and four civil experts.
However, this time, all six members, with one abstention, reached a consensus on probing Tong Yang Securities.
The FSS’ approval came amid rising criticisms that financial authorities were partly responsible for the Tong Yang scandal as it failed to preemptively counter its liquidity crisis.
The FSS said in a statement that the FSS chief met with Tong Yang executives four times, urging them that “Tong Yang Group and its largest shareholder must take full responsibility and every single investor must be protected.”
