Financial Supervisory Service Tentatively Confirms Asset Manager's Self-Interest Conduct
"Strict Measures According to Law... Notification to Investigative Agencies Underway"
In the asset management industry, it has been revealed that numerous violations occurred, including employees improperly using business information to invest under family names, engage in loans, and brokerage activities. There was even a case where real estate assets of a personally invested fund were purchased with fund money and not reported to the company.
The Financial Supervisory Service (FSS) announced on the 25th that, after selecting the unfair pursuit of private interests by employees of financial investment companies as a key inspection item and conducting focused inspections, many violations were tentatively confirmed in recent examinations.
For example, a portfolio manager at Company A invested about 300 million KRW in a fund managed by another asset manager that invested in real estate. Several years later, the manager established a fund at their own company and directly purchased the real estate from the fund they had previously invested in. The portfolio manager did not disclose this fact to Company A or the investors of their company’s fund, violating the duty to manage conflicts of interest. After this transaction, during the liquidation of the fund they had personally invested in for the first time, the manager received approximately twice the invested amount.
There are also cases where employees of financial investment companies, while managing real estate funds and project finance vehicles (PFVs), used business information obtained to invest in portfolio companies under their own or family corporation names or privately lent money to gain profits.
Another company’s portfolio manager, during the process of selling assets held by their company’s fund to another asset manager, introduced a consulting firm they were familiar with to the buyer for advisory services and received 2 billion KRW through their family company as a brokerage fee from the consulting firm.
The FSS stated, "We plan to take strict measures against the violations confirmed through inspections in accordance with relevant laws and will also notify investigative agencies. We will guide financial investment companies to strengthen internal controls and continue to monitor these types of violations in future inspections. Additionally, we will improve the system so that various capital market participants, including individuals and institutions, can better utilize sanction records when making investment decisions."
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