Financial Authorities Alarmed by Shinhan Investment Corp Incident... Inspection of 26 Securities Firms and Asset Management Companies Underway

Shinhan Investment Corp. Issues Industry Self-Inspection Notice on Concealment of 130 Billion KRW Operating Loss
Financial Supervisory Service to Initiate Inspection if Issues Found

The Financial Supervisory Service (FSS) has launched an inspection targeting 26 securities firms and major asset management companies following the 130 billion KRW operational loss incident related to exchange-traded fund (ETF) futures trading at Shinhan Investment Corp.

On the 14th, the FSS dispatched an inspection team to Shinhan Investment Corp for an on-site examination and sent official letters to 26 securities firms and major asset management companies, instructing them to conduct internal checks to ensure no similar cases exist.

They were ordered to verify internally whether any losses related to similar derivative transactions were concealed and to report the findings to the FSS.

Financial Services Commission Chairman Kim Byung-hwan has instructed authorities to take strict measures regarding the Shinhan Investment Corp incident. At a meeting with senior officials of the Financial Services Commission held at the Government Seoul Office that day, Chairman Kim said, "There are ongoing concerns as various financial accidents such as embezzlement and fraudulent loans continue in the financial sector. Recently, a large-scale loss occurred at Shinhan Investment Corp," adding, "I hope the Financial Supervisory Service thoroughly inspects and investigates this incident and takes necessary actions based on the results."

The FSS plans to immediately exercise its inspection authority if any issues are found during the review.

Shinhan Investment Corp incurred approximately 130 billion KRW in losses between August 2 and this month’s 10th while operating as a liquidity provider (LP) for ETFs. It is reported that the losses resulted from on-exchange futures trading beyond the intended purpose during fund management. In addition to its LP role, the company engaged in proprietary trading to gain extra profits through futures trading, which led to the large-scale loss.