The Financial Supervisory Service (FSS), which has launched a comprehensive investigation into bond fraud issuance against Homeplus and its major shareholder MBK Partners, confirmed that circumstances differing from the company's explanations were found during the corporate rehabilitation procedure (court receivership) application process. The FSS also identified the possibility of accounting violations and has switched to a mandatory audit investigation starting this week.
"They likely anticipated the credit rating downgrade in advance"
Ham Yong-il, Deputy Director of the Capital Markets and Accounting Division at the FSS, stated during a briefing at the FSS office in Yeouido on the morning of the 1st, "There has been meaningful progress, including the discovery of circumstances that differ from the explanations provided by MBK Partners and Homeplus regarding the recognition of the possibility of a credit rating downgrade, the background of the rehabilitation application, and the application itself." Since the end of last month, the FSS has launched a task force (TF) to respond to the Homeplus situation and is conducting a comprehensive investigation to determine whether Homeplus issued short-term bonds despite planning rehabilitation.
Deputy Director Ham assessed that contrary to MBK Partners' claim that they were unaware of the credit rating downgrade and that the preparation for Homeplus's court receivership application began on February 28, "it is highly likely that they recognized the downgrade before that date." He explained, "If the charge of bond fraud issuance is confirmed, fraudulent unfair trading could be established, similar to previous cases such as Dongyang," adding, "then it would be a matter for criminal punishment." He further noted, "Since MBK Partners is a subject of investigation, other sanctions may also be possible." When asked whether there are plans to cooperate with the Financial Services Commission and others for future compulsory investigations, he left the possibility open, saying, "If necessary, there are compulsory measures."
Additionally, Deputy Director Ham said, "Regarding the accounting review, there is also a possibility of violation of processing standards," and explained, "We have switched to an audit investigation starting this week to examine the matter more thoroughly." In this case, it is possible to summon auditors and conduct a deeper investigation, which could lead to sanctions.
Deputy Director Ham also pointed out that Homeplus and MBK Partners should demonstrate responsible behavior. He criticized, "Although they claim to be sequentially paying trade debts, uncertainty about repayment timing and priority continues to cause anxiety among partner companies and tenants," and added, "They are consistently vague in their arguments while not paying rent for stores." He urged, "Even now, Homeplus should concretely present full repayment as promised to restore trust among stakeholders and the market," emphasizing, "The FSS will also mobilize all available resources to thoroughly investigate various suspicions, including fraudulent unfair trading."
"Will conduct a comprehensive review of the ETF market" Criticizes fee reduction competition
Regarding Hanwha Aerospace's rights offering, the plan is to proceed according to principles. Deputy Director Ham emphasized, "We have requested corrections because we judged that the information necessary for investors' rational judgment was insufficient," and added, "The review is consistently conducted based on the fundamental principles of disclosure to protect investors." He also stated, "Hanwha Aerospace needs to disclose in the securities registration statement the reasons for choosing a rights offering among various fundraising methods, the timing of the offering, the purpose of fund usage, and the impact of the offering on the company."
He also criticized the recent fee reduction competition among exchange-traded funds (ETFs), pointing out that asset management companies are focusing more on securing market share than on healthy growth. Deputy Director Ham explained, "There have been continuous criticisms about excessive fee competition, proliferation of similar products, and insufficient provision of thorough information to investors, indicating a lack of healthy growth," and added, "Recently, it is concerning that leading companies, which should lead the market, are focusing only on securing market share rather than competition."
Accordingly, the FSS plans to conduct a comprehensive review of the ETF market. He said, "We plan to inspect asset management companies regarding their fee decision systems, conflicts of interest among funds, and overall product management practices," and added, "We are devising comprehensive measures to establish order in the ETF market."
He also pointed out the recent issue of passive voting by asset management companies. He stated, "Asset management companies exercise voting rights on only 28% of their holdings, and the reasons for exercising these rights are simply and formally stated," emphasizing, "To establish a culture of responsible voting, we will conduct continuous inspections and disclose exemplary and non-compliant cases next month."
In addition, the FSS plans to prepare measures to prevent recurrence of the Korea Exchange's (KRX) computer system failure that caused a seven-minute trading halt on the Korea Composite Stock Price Index (KOSPI) recently. Deputy Director Ham said, "We began an on-site inspection on the 25th of last month," and explained, "We will accurately diagnose the cause and prepare measures to enhance the stability of the entire exchange computer system to prevent similar incidents from recurring." Regarding the investigation of Sambu Construction, he said, "We are allocating resources and manpower with the goal of completing it within April."
At the briefing, questions were also raised about the position of FSS Chairman Lee Bok-hyun in relation to Prime Minister and Acting President Han Duck-soo's exercise of the right to request reconsideration (veto) of the amendment to the Commercial Act. Chairman Lee, who has about two months left in his term, has opposed the exercise of the veto and has said he would stake his position on it. Deputy Director Ham dismissed the question, saying, "I cannot answer regarding his position," and added, "I have nothing particular to say."
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