Requests for Organizational Charts Sent to Top 30 PEFs
Following Tax Probes into MBK, FSS Steps In
Private Equity Industry Worries About 'Homeplus Aftermath'
FSS Says, "Document Collection Was Preplanned"
The Financial Supervisory Service (FSS) has been confirmed to have requested internal documents such as organizational charts from major private equity fund (PEF) management companies. Following the National Tax Service's tax investigations into MBK Partners and KCGI, the FSS's request for internal control-related documents has left the private equity fund industry on edge.
On the 14th, a source from the private equity fund industry stated, “The FSS contacted us to submit internal control documents that had never been requested before,” adding, “We plan to submit materials related to organizational charts, contact information, and fund details.” Major firms including MBK Partners, Han & Company, IMM Private Equity, Stick Investment, and VIG Partners were all included in the submission targets.
Regarding this, an FSS official said, “It is true that we requested document submissions from the top 30 large private equity funds by assets under management,” and added, “We announced at the end of last year that we would collect related documents, and this is the execution of that plan.”
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Until now, the FSS has received quarterly reports on the operation of funds established by institution-specialized private equity funds. However, it had not received separate reports on the fund management companies (GPs) operating the funds. This is because GPs are subject to strict control by major domestic institutional investors (LPs) such as the National Pension Service and Government Employees Pension Service.
Within the private equity fund industry, concerns are rising that inspections on private equity funds may be expanding comprehensively. Earlier, on the 11th, news broke that the National Tax Service had begun tax investigations into MBK Partners and KCGI. On the 13th, shortly after FSS Governor Lee Bok-hyun stated regarding the Homeplus incident that “inspections within the minimum scope will be inevitable,” the FSS commenced inspections of Shin Young Securities and two credit rating agencies.
According to the Capital Markets Act, the Financial Services Commission can take various measures such as dissolution orders and business suspension against institution-exclusive private equity funds based on FSS inspection results, depending on violations such as the use of undisclosed material information, fraudulent trading activities, or concerns about significantly undermining financial market stability.
Within the private equity fund industry, rumors circulated that several firms, including MBK Partners, could become targets following the emergence of the 'New Financial-Industrial Separation' theory (concerns over the strengthening of industrial capital control over financial capital) initiated by the FSS at the end of last year.
In MBK’s case, prior to the Homeplus incident, suspicions had been raised regarding the 2023 Ostem Implant CB call option disguised gifting allegations and last year’s Korea Zinc management rights dispute. Additionally, companies such as Company A, which purchased listed company stocks and sold them via off-hours block deals within less than a year causing a sharp stock price drop and backlash from minority shareholders; Company B, linked to the Ostem Implant case; Company C, accused of fund employees trading stocks using undisclosed information of the acquiring company; and Company D, which made a separate contract with Bang Si-hyuk, chairman of HYBE, to return listing profits, have all been subjects of discussion.
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