Securities and Futures Commission Takes Strong Action Against 3 Companies Including Lead for Accounting Standards Violations

[Asia Economy Reporter Dongwoo Lee] The Securities and Futures Commission under the Financial Services Commission announced on the 18th that it held a regular meeting and decided to file a criminal complaint with the prosecution against the unlisted corporation 'Lead' and four individuals including the former CEO.

It also resolved measures including a 12-month restriction on securities issuance, a fine of 48 million KRW, and a three-year auditor designation. The penalty on company officials will be finally decided by the Financial Services Commission in the future.

According to the Securities and Futures Commission, Lead, a manufacturer of display manufacturing machinery, falsely recorded approximately 80 billion KRW as loans to conceal embezzlement by management during 2017-2018.

It was also investigated that the company fabricated guarantees and other documents to understate allowance for doubtful accounts and disguised the purchase of machinery and equipment to embezzle company funds. The company also obstructed external audits by overstating sales or submitting false tax invoices.

Furthermore, the Securities and Futures Commission resolved measures including a six-month restriction on securities issuance, a fine of 375 million KRW, a two-year auditor designation, and corrective demands against the KOSDAQ-listed company 'CNT85' (formerly Poslink). A fine of 10 million KRW was imposed on the former CEO of this company.

CNT85, a resource development and sales company, was found to have inflated sales and cost of sales and understated allowance for doubtful accounts on loans during 2015-2017.

The Securities and Futures Commission also resolved measures including an eight-month restriction on securities issuance and a two-year auditor designation against KS Wallpaper (formerly FT Wallpaper), a wallpaper manufacturing and sales company. The company and two individuals including the former CEO will be reported to the prosecution.

KS Wallpaper was found to have overstated selling and administrative expenses in 2016 and obstructed external audits by submitting false business plans to the auditor to conceal this.