The Financial Supervisory Service Also Investigates Possible Unfair Trading in Korea Zinc's Paid-in Capital Increase
by Hwang Yoonju
Published 31 Oct.2024 13:56(KST)
Urgent Briefing on Korea Zinc Issue on the 31st
Likely to Request Amendment Report for Paid-in Capital Increase
The Financial Supervisory Service (FSS) is investigating not only the management rights dispute at Korea Zinc but also whether there were any unfair practices during Korea Zinc's rights offering process. Given that FSS Governor Lee Bok-hyun has emphasized a 'zero-tolerance policy' toward unfair trading practices, strict measures are expected if any unfair acts such as insider trading or fraudulent transactions are found during the rights offering disclosure process.
On the 31st, an FSS official stated, "We are investigating whether there were any unfair trading activities related to Korea Zinc's rights offering alongside the public tender offer for Korea Zinc," adding, "After thoroughly reviewing trading records and other details since the rights offering news was announced, we plan to complete the investigation as soon as possible."
The FSS began an investigation on the 9th to verify any unfair trading activities during Korea Zinc's public tender offer process. Subsequently, on the 16th, an accounting review was initiated. If accounting violations are uncovered, the process will escalate to the audit stage, which involves examining the auditor's findings. Previously, Kakao Mobility received a preliminary notice of disciplinary action from the FSS, including a recommendation to dismiss the CEO, due to allegations of accounting fraud. The case is currently awaiting final sanctions from the Financial Services Commission.
Governor Lee Bok-hyun warned at the end of last month, as the Korea Zinc management rights dispute intensified, that "zero tolerance will be applied to any detected illegal activities, and strict measures will be taken." It is reported that Governor Lee unofficially described the Korea Zinc management rights dispute as "inappropriate."
The FSS is expected to first put a halt to Korea Zinc's rights offering plan. The FSS reportedly agrees with criticisms that sufficient prior disclosure of information that could affect investment decisions was not made. Therefore, there is a possibility that the FSS will request the submission of a revised rights offering report. The FSS previously requested revised reports twice regarding the merger plans of Doosan Robotics and Doosan Bobcat. Ultimately, the Doosan Group withdrew the merger plan.
Meanwhile, after the market closes today, Ham Yong-il, Deputy Governor of the Capital Markets and Accounting Division at the FSS, will hold a briefing and Q&A session on current issues. It is expected that topics surrounding recent capital market concerns, including the Korea Zinc management rights dispute, Doosan Group's corporate restructuring, and Shinhan Investment Corp.'s liquidity provider (LP) operation losses, will be broadly addressed.
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