The local operation of Goldman Sachs Group, a U.S. multinational investment bank, is likely to face a prosecutors’ investigation over its allegedly unlicensed overseas bond sales, according to market insiders on Wednesday.

“We have conducted an investigation over three foreign-invested securities companies (including Goldman Sachs) in September, and are currently analyzing the results,” the Financial Supervisory Service said in a press release.

The state regulator noted that it has completed a two-week investigation into Goldman Sachs, Credit Suisse Group AG and Royal Bank of Scotland Plc., and is currently reviewing the results.

The FSS’ comment came after a local news provider alleged that the Hong Kong branch of Goldman Sachs sold bonds of a Malaysian state-run developer called 1 Malaysia Development Berhad to Korean institutional investors.

The Hong Kong branch sold about 1.2 trillion won ($1.1 billion) in 1MDB bonds from October 2012 to June 2013, the paper added.

Korean regulations state that only the Korean branches of licensed investment banks are entitled to sell foreign bonds to Korean investors. The act is aimed at protecting financial customers against financial fraud and purchases of high-risk instruments without professional consultations.

“The news reports seem to be a stretch,” said Cho Gook-hwan, director general of the FSS Financial Investment Examination Department.

“The department has been totally occupied with the ongoing Tong Yang crisis, and we have yet to finish analyzing the investigative results (on the three investment banks),” he added, denying expectations that the investigation would lead to more probes on foreign investment banks.

The director general also stressed that the FSS has not yet asked for a collective investigation to its Hong Kong counterparts, as alleged in the news reports.

If the final results point to Goldman Sachs’ violation, the regulator is expected to turn the case to the prosecutors, as the regulator is authorized only to investigate but not prosecute, another FSS official said.

By Chung Joo-won (joowonc@heraldcorp.com)