FSS Warns Strict Crackdown on Illegal Capital Market Activities Abusing Private CBs

"Currently Investigating 14 Major Incidents Related to CB"

[Asia Economy Reporter Lee Seon-ae] The Financial Supervisory Service (FSS) announced on the 19th that it will operate a joint response team for private placement convertible bonds (CB) involving all sectors of the capital market to strictly crack down on various illegal activities abusing CBs.

According to the FSS, the total amount of private placement CBs issued over the past three years (2020?2022) reached 23.2 trillion KRW, significantly expanding compared to the past. In particular, the amount of private placement CBs issued in 2021 surged by about 50% from the previous year to 10.8 trillion KRW.

The FSS analyzed that alongside the expansion of private placement CB issuance, unfair trading practices such as market manipulation and dissemination of false information after acquiring CBs to drive up stock prices and convert them into shares for illicit gains have been continuously occurring.

In response, the FSS has operated a focused monitoring system on unfair trading abusing CBs since last year and swiftly handled 16 major CB-related cases, including EdisonEV, last year.

As of January this year, the FSS is investigating 14 major CB-related cases and plans to complete the investigations as quickly as possible and refer them to the prosecution through fast-track procedures.

Additionally, through comprehensive inspections of issuance details, analysis of media reports, tips, and abnormal signs, the FSS has identified 56 more stocks and is conducting trading analyses. If any unfair trading suspicions are found, a full investigation will be promptly initiated.

Furthermore, the FSS will operate a 'Private Placement CB Joint Response Team' involving all sectors of the capital market, including investigation, disclosure, accounting, and inspection, to strictly respond to various illegal activities such as unfair trading, disclosure violations, and unsound business practices.

The FSS announced plans to revise corporate disclosure formats by adding the payment method as a mandatory item in the major report on CB issuance decisions and specifying detailed information and evaluation methods of assets used for substitute payment.

In particular, when substitute payment is made through unlisted stocks, the overview of the unlisted company will be recorded to ensure that sufficient information necessary for investment decisions is provided.

Separately, the FSS plans to promote measures requiring issuers to disclose related information when they acquire privately issued CBs before maturity.

The FSS stated, "To protect investors, we plan to focus on reviewing the appropriateness of the evaluation methods for assets used in substitute payments in the major report on CB issuance decisions," and added, "We will continuously guide investors on points to note through inspection and analysis of disclosure information."

This content was produced with the assistance of AI translation services.