Financial Services Commission Monitoring Controversy Over Hanyang Securities Sale, Will Major Shareholder Pass Eligibility Review?

Priority Bidder Selection Scheduled for Sale on the 2nd
Financial Services Commission's Major Shareholder Eligibility Review Remains

Hanyang Securities is expected to announce the selection of a preferred negotiator for its sale on the 2nd. Amid growing noise in the sale process, there are expectations that the financial authorities' suitability review of the major shareholder will not be easy. This is because the financial authorities have recently been closely examining issues related to unfair trading in the capital market and the protection of general investors, and are expected to scrutinize the major shareholder suitability review thoroughly.

According to financial authorities and the financial investment industry on the 2nd, Hanyang Hakwon will apply for the major shareholder suitability review to the Financial Supervisory Service in the final stage of the sale after deciding on the preferred negotiation target. The sale will be finalized only after approval from the Financial Services Commission.

The financial authorities are also closely monitoring the situation as noise surrounding the sale of Hanyang Securities increases. A Financial Services Commission official said, "We are aware that this is an issue attracting market attention," adding, "If it escalates into issues such as the protection of general shareholders, we will verify it."

According to Article 31 of the Financial Companies Governance Act and Article 26 of its Enforcement Decree, if the major shareholder is a financial institution, they must not have been punished with a fine or higher penalty for violating financial-related laws within the past five years. Additionally, they must not have undermined credit order to receive approval for the change of major shareholder.

In the market, there are significant suspicions about the genuine nature of the sale and disputes over the fairness of the sale procedure. Although Hanyang Hakwon holds a 16.29% stake in Hanyang Securities, only 11.3% is being sold. In particular, it is known that the 4.99% stake held by Kim Jong-ryang, Chairman of Hanyang University, is excluded from the sale. Even after the sale is completed, Chairman Kim will remain the second-largest shareholder with a 9% stake. Furthermore, negotiations are being conducted with prospective buyers without an underwriter, and the period for selecting the preferred negotiator is excessively short, fueling perceptions that this might be an 'unfair private contract.'

The reason for the sale is also controversial. Hanyang Hakwon stated that the sale of Hanyang Securities is being pursued to cover "corporate operating expenses, remittances to various schools, and support funds for the medical center." However, the industry consensus is that Hanyang Industrial Development, a construction company under Hanyang Hakwon, is pushing for the sale to overcome the insolvency of its real estate project financing (PF). There are suspicions that Hanyang Hakwon plans to supply liquidity to Hanyang Industrial Development through a loophole.

Using the proceeds from disposing of Hanyang Securities shares, which are school assets, to support Hanyang Industrial Development, a legally separate corporation, would fundamentally violate the Private School Act.

Meanwhile, the sale target of Hanyang Securities includes about 30% of shares held by related parties such as Baeknam Tourism and HBDC, including the 11.3% stake held by Hanyang Hakwon. Hanyang Hakwon was scheduled to select the preferred negotiator for the sale of Hanyang Securities the previous day. However, due to fairness controversies, the announcement is now expected on the 2nd.