Financial Supervisory Service Uncovers Major Shareholders of Asset Management Firms... Use of Non-Public Information and Unfair Support to Affiliates

Financial Supervisory Service, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

On the 16th, the Financial Supervisory Service (FSS) announced that, as a result of an inspection focusing on the self-serving acts of major shareholders, violations such as the use of undisclosed insider information by major shareholders and CEOs, damage to fund profits, and unfair influence were discovered at a specific asset management company.

According to the FSS, Mr. B, a major shareholder of Asset Management Company A, concurrently held key positions such as CEO, chairman of the board, and chairman of the investment review committee. He was caught damaging the interests of the fund and the management company by using undisclosed insider information and exerting unfair influence, while pursuing benefits for himself, his spouse, and direct descendants.

The main violations include Mr. B’s use of undisclosed redevelopment information. Upon receiving a report that land was needed for the redevelopment of real estate held by the company’s fund, he pre-purchased the land at a low price under the name of a related party company C and then sold it at a high price to the company’s fund within a short period, earning tens of billions of won in profits. During this process, despite the prohibition on financial support to related parties, he improperly provided tens of billions of won in deposits of Asset Management Company A as collateral for bank loans to indirectly support the land purchase funds.

Mr. B was also found to have used undisclosed project information. Upon receiving advance reports on project progress and obtaining insider information on a high-quality project, he made prior and indirect investments under the name of a related party company to gain unfair profits.

For the prior investment, Mr. B instructed a fund manager to create investment opportunities for related party company D. The fund manager reduced the planned investment amount of Asset Management Company A in the project finance vehicle (PFV) to allow D to invest in PFV shares by changing the shareholder structure. Although D intended to invest in PFV shares under its name, due to insufficient funds at the time of PFV establishment, an external investor initially purchased the PFV shares, and D repurchased them at cost after securing funds, thus making an indirect investment.

Furthermore, Mr. B exerted unfair influence to support affiliated companies. To provide profit opportunities to affiliated companies controlled by himself, his spouse, and direct descendants, he directed an increase in the fees that the affiliated companies could receive during the joint project process between Asset Management Company A and the affiliates.

To this end, Asset Management Company A signed new contracts with the affiliates and amended contracts with the PFV to reduce the fees it could receive and provide them to the affiliates.

An FSS official stated, "We plan to take strict measures according to relevant laws and procedures regarding the illegal and unfair acts confirmed during the inspection. We will actively cooperate with investigative authorities by notifying them of the illegal facts and sharing the inspection results. We also plan to continuously monitor the self-serving acts of major shareholders and executives of financial investment companies and devise measures to prevent recurrence."

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