'Securities Company Employees on Trial for Using Job Information for Private Investment'
Eight former employees of the IB business teams at securities firms have been collectively brought to trial on charges including embezzling private gains using information obtained during work and receiving large sums of money in exchange for loan brokerage.
On the 30th, the Tax Crime Investigation Division of the Seoul Central District Prosecutors' Office (Chief Prosecutor Lee Jin-yong) indicted seven former employees of Meritz Securities and one employee of Daol Investment & Securities after investigating crimes involving the use of job-related information by securities firm employees. The prosecution had previously indicted Meritz Securities executive Mr. A in July, and on this day indicted the remaining seven without detention on charges of using job-related information.
Mr. A is accused of acquiring real estate using information about property sales obtained during his duties, requesting subordinates to arrange loans during this process, and providing them with money in return. Through the arrangements made by his subordinates, Mr. A secured loans totaling 118.6 billion KRW from financial institutions. Based on this, he acquired 11 real estate properties, earning a total of 24.5 billion KRW in profits and rental income. Additionally, he falsely registered the families of subordinates Mr. B and Mr. C as employees of his company and paid them salaries, providing them with 850 million KRW as brokerage fees. The prosecution stated that Mr. A’s crimes involving the use of job-related information were not prosecuted due to the statute of limitations.
Furthermore, five individuals including Mr. B and Mr. C are charged with making profits in the hundreds of millions of KRW by using information obtained while arranging the issuance of convertible bonds (CB) for a KOSDAQ-listed company in March 2019. They established a special purpose company (SPC) under the name of an acquaintance who is an accountant, had family members invest in the SPC, and acquired 2.5 billion KRW worth of CBs in the name of the SPC. They then converted the CBs into stocks and sold them, earning a total profit of 990 million KRW from interest and conversion gains, according to the prosecution. In September 2022, they acquired 4 billion KRW worth of CBs using the same method and earned 390 million KRW as interest.
Mr. D and Mr. E acquired 15 billion KRW worth of CBs from another KOSDAQ-listed company and used the information obtained to sell 3 billion KRW worth to an asset management company owned by Mr. D, earning management fees. They also acquired call options worth 600 million KRW on behalf of an acquaintance and exercised them, earning 7 million KRW.
Earlier, from October to December 2023, the Financial Supervisory Service conducted planned inspections on five securities firms including Daol Investment & Securities, Meritz Securities, LS Securities, Hi Investment & Securities, and Hyundai Motor Securities, uncovering illegal practices at all these firms and reporting and filing complaints to the prosecution. The prosecution stated, “We have confirmed serious moral hazard cases where employees of reputable large securities firms received hundreds of millions of KRW in bribes for loan brokerage and exploited information obtained through their duties to gain private benefits in various ways.” They added, “We will continue to strictly respond to illegal activities by financial institution employees according to law and principles and conduct investigations to restore trust in the capital market.”
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