Prosecutors Conduct Search and Seizure at 8 Securities Firms Over Allegations of 'Rap and Trust Circular Transactions'

Investigation into Bond Brokerage Transaction Records and More

Prosecutors investigating the circular trading allegations involving bond-type wrap and trust accounts at nine securities firms have launched a forced investigation into securities firms that traded with them.

Yonhap News

The Financial and Securities Crime Investigation Division of the Seoul Southern District Prosecutors' Office announced on the morning of the 16th that it is conducting a search and seizure of eight securities firms that traded with the nine securities firms suspected of circular trading of bond-type wrap and trust accounts. The prosecutors are focusing on the details of bond brokerage transactions between securities firms.

Previously, nine securities firms including Mirae Asset Securities, Korea Investment & Securities, NH Investment & Securities, KB Securities, Hana Securities, Kyobo Securities, Yuanta Securities, Eugene Investment & Securities, and SK Securities are suspected of causing market disruption by redeeming bond-type wrap accounts and specific money trusts when the fund market tightened due to the 'Legoland incident' in the second half of 2022.

Last year, the Financial Supervisory Service (FSS) conducted intensive inspections of these securities firms and uncovered the use of proprietary funds to cover maturing customers' profits or illegal circular trading that shifted customer profits and losses onto other customers. As a result, in June, the FSS imposed a three-month partial business suspension, severe disciplinary actions on operation staff, and a cautionary warning to CEO Lee Hong-gu of KB Securities on two firms, Hana Securities and KB Securities, which had large-scale circular trading.

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