FSS Accelerates Disciplinary Action Against Maston Asset Management for Real Estate PF 'Private Gain'

Last Year's Prosecutor's Opinion Submission
Preparation of Sanction Proposal - Review by Sanction Committee - Delivery of Preliminary Notice
Serious Disciplinary Cases Must Follow FSC Procedures

The Financial Supervisory Service (FSS) is intensifying disciplinary procedures against Maston Investment Management (Maston Management), which is under investigation for the major shareholder's acts of private gain. Considering the gravity of the case, including the use of undisclosed information by the major shareholder, severe disciplinary action is deemed inevitable.

According to the financial investment industry on the 20th, the FSS's Financial Investment Inspection Division 2 has drafted a disciplinary action plan related to the investigation of Maston Management employees' private gain and has reportedly submitted it to the Disciplinary Review Committee. After the committee's review, a prior notification letter will be sent to Maston Management.

In March last year, the FSS conducted a comprehensive investigation into the personal fund investments of employees at all domestic asset management companies. The focus was on whether employees engaged in private gain, particularly in real estate funds, by investing their own money.

During this process, the FSS reported the investigation of Maston Management's major shareholder's private gain to the prosecution. Kim Dae-hyung, the major shareholder and former CEO, reportedly pre-purchased land at a low price under the name of a related special purpose corporation after receiving reports that the company's fund was acquiring land for real estate redevelopment. He then sold the land he purchased to the fund at a higher price, earning tens of billions of won in profits. Notably, it was also uncovered that company deposits were used as collateral during the land purchase process.

Maston Management also underwent a special tax audit by the Seoul Regional Tax Office's Investigation Division 4 in June. Division 4 is a dedicated team that conducts special tax audits when illegal fund creation such as tax evasion or slush funds is suspected. Because of this, it is nicknamed the "corporate grim reaper." The National Tax Service's special tax audit is reported to be related to former CEO Kim's acts of private gain.

Maston Management is expected to face severe institutional disciplinary action. This is due to allegations of providing credit to the major shareholder beyond the legal limit. Institutional sanctions are classified into five levels: institutional caution, institutional warning, corrective order, business suspension, and cancellation of registration or approval. From institutional warning onwards, the sanctions are considered severe, and cases involving severe sanctions or higher are escalated to the Securities and Futures Commission (SFC) under the Financial Services Commission.

The FSS Financial Investment Inspection Division reportedly stated in its second half of the year work report that it would accelerate ongoing cases such as private gain by asset management companies. Considering this, disciplinary action against Maston Management is expected to be finalized within the year. The FSS disciplinary procedure follows the order of notifying the prosecutor's opinion, drafting the disciplinary plan, delivering the prior notification letter, FSS disciplinary review, and then the Financial Services Commission (SFC). After drafting the disciplinary plan and internal review, once the Disciplinary Review Committee schedule is set, the prior notification letter is delivered.

Meanwhile, an FSS official stated, "We cannot confirm matters under investigation."