Kim Byung-hwan, Chairman of the Financial Services Commission, "Shinhan Investment Corp. Incident Must Be Thoroughly Inspected Before Taking Action"

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Financial Services Commission Chairman Kim Byung-hwan is responding to lawmakers' questions during the National Assembly's Political Affairs Committee's audit of the Financial Services Commission and the Korea Development Bank held on the 10th. Photo by Kim Hyun-min kimhyun81@

On the 14th, the Financial Services Commission (FSC) emphasized thorough inspections during an executive meeting, pointing out a financial accident related to Shinhan Investment Corp.'s exchange-traded fund (ETF) operations.

According to the FSC on that day, Chairman Kim Byung-hwan held an executive meeting and stated, "There are ongoing financial accidents in the financial sector, including various embezzlements and fraudulent loans, which is concerning."

Chairman Kim said, "Recently, a large-scale loss occurred at Shinhan Investment Corp. I hope the Financial Supervisory Service (FSS) will thoroughly inspect and investigate this incident and take necessary measures based on the results."

Earlier, it was revealed that Shinhan Investment Corp. incurred losses amounting to 130 billion KRW during futures trading as part of its ETF liquidity provider (LP) operations. An LP continuously offers buy and sell quotes to ensure smooth trading of ETFs. It plays a role in inducing stable price formation of ETFs.

However, it appears that losses occurred when the KOSPI index plunged after engaging in futures trading to seek additional profits. In particular, Shinhan Investment Corp. employees falsely registered the transactions as ordinary swap trades (transactions exchanging financial assets by setting a specific future date and period) to conceal the occurrence of losses.

On the 10th, Shinhan Investment Corp. confirmed through its internal control system that the swap trade registration was false and reported it to the Financial Supervisory Service. Accordingly, the FSS dispatched personnel to Shinhan Investment Corp. and is currently conducting an on-site inspection.

An FSC official explained, "Given the recent frequent incidents, it seems that the mention of the Shinhan Investment Corp. accident at the executive meeting was intended to tighten the relaxed internal controls."