FSA chairman hints strict response against mass buying of SM shares 

Financial Supervisory Service (FSA) Chairman Lee Bok-hyun said on Tuesday that "if it is confirmed that a certain faction or group of people have engaged in elements of illegal behavior, we will use our full authority under the law and system to hold them accountable."

Lee spoke to reporters after a meeting of CEOs of 14 securities firms at the Korea Financial Investment Association in Yeouido, Seoul.

"We tried to take a balanced view of some issues, such as procedural compliance and concerns about market disruption or consumer harm, in relation to the M&A (merger and acquisition) of certain entertainment companies," Lee said, adding that the regulator should take a closer look at the unfair trade allegations that have recently emerged as the process is being finalized.

"Our basic position is that healthy disputes within the rules and system should be left to the full autonomy of the market," Lee said, but warned that "if illegal means or methods are used in the overheated process, it is completely unacceptable in light of the zero-tolerance principle for unfair trade announced by the current government after the change of the head of the financial regulator." "We will do our best to prevent the acquisition of economic benefits through illegal means," he stressed.

Hive had asked the Financial Supervisory Service to investigate the large-scale purchase of SM shares at IBK Investment & Securities' Pangyo branch on Feb. 16, calling it an abnormal purchase behavior. "It should be considered that the stock transaction through IBK Pangyo branch was carried out at a crucial stage when S.M.'s stock price surged from 120,000 won to 130,000 won," Hive said. "It is strongly suspected that this was done with the purpose of manipulating the market price to obstruct Hive's tender offer."

Lee also commented on the performance system of securities firms in real estate PF (financing projects). "We sympathized with the concerns that the performance system for making the first deal (contract) may be too heavily weighted toward initial performance rather than reflecting mid- to long-term performance," he said, explaining that such opinions may be reflected in the process of reorganizing the performance pay system in the future.

Regarding the proposal to allow securities firms to settle corporate payments, which is unique to banks, he said, "There are advantages and disadvantages to allowing this, so we will think about how to minimize the disadvantages." He added, "However, I asked them to look at whether there is a division (unique to securities firms) within securities firms, like banks, that is so natural that they don't even realize it exists."

By Corporate Korea