Chiefs of Korea’s Financial Services Commission and Financial Supervisory Service may face investigation by the prosecution over Tong Yang Group’s liquidity crisis.
The Financial Consumer Agency said on Thursday that it would file a complaint with the prosecution against FSC Chairman Shin Je-yoon and FSS Gov. Choi Soo-hyun for their “incompetence and negligence” in preemptively dealing with the conglomerate and preventing investor losses.
The agency added that the financial regulators had known about the situation emerging at Tong Yang, and that its securities unit had underwritten bonds of its affiliates that lacked creditworthiness before marketing them to investors.
But Cho Nam-hee, the FCA president, said what was more surprising was that high-ranking officials at the FSC and the FSS acted as if the Tong Yang crisis had “nothing to do with them” and that they were “not responsible.”
Cho said the agency had decided to press charges against FSC chairman Shin for failing to devise protective policy for investors, and against FSS Gov. Choi for failing to properly manage the situation.
The financial regulators said that the FSC and FSS chiefs were not primarily responsible for the crisis that had been brewing for years as they were appointed to their posts early this year.
They reiterated that the problem of Tong Yang was its “failure to manage risk” rather than the failure of the chiefs.
The Financial Consumer Agency said that it would also begin preparing for a class-action lawsuit against the conglomerate after evaluating the losses of investors incurred from investments in bonds of affiliates of Tong Yang Securities.
The financial regulators have been criticized for failing to avert the crisis at the debt-laden Tong Yang, in stark contrast to the Park Geun-hye administration’s policy of promoting investor protection.
The FSS recently accepted a petition filed by a group of consumers to launch a special probe into the conglomerate amid heightened social pressure and criticism.
A local court also accepted the request from the troubled conglomerate for court receivership for its five units.
The five are Tongyang Inc. Tongyang Leisure, Tongyang International, Tongyang Cement and Energy, and Tongyang networks.
The affiliates filed for court receivership early this month after failing to pay back maturing short-term debts amounting to about 110 billion won ($102 million).
