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(Photo= Yonhap news) |
[Alpha Biz= Reporter Kim Sangjin] Shinhan Investment Corp is facing significant disciplinary action from the Financial Supervisory Service (FSS) after incurring a loss of 130 billion won by pursuing profits unrelated to its role as a liquidity provider (LP). The FSS has indicated that "strong measures (sanctions) are unavoidable."
At a briefing on capital market issues held on October 31, Ham Yong-il, Deputy Director of the FSS's Capital Market and Accounting Division, stated, "There was false documentation by the Shinhan Investment Corp staff during the process of concealing the losses, and there were also colluding participants."
The briefing was conducted to explain the FSS's position regarding the Shinhan Investment Corp incident. As an LP for exchange-traded funds (ETFs), Shinhan Investment was only supposed to hedge risks, but it instead sought profits, resulting in the significant loss. The staff member responsible hid the losses through false reporting, which Shinhan Investment discovered two months later.
Deputy Director Ham explained, "LPs are supposed to hedge, but Shinhan Investment speculatively opened positions, leading to a 130 billion won loss." He added that "the punishment for the individuals involved will be quite severe, and there are substantial organizational issues that necessitate strong actions."
He emphasized that LPs are not meant to pursue profits. "LPs should only engage in transactions for hedging purposes, but if an employee aligns with the direction of futures and makes money, they receive incentives. If they take risks and lose, incidents like this occur," he noted. He further mentioned, "Similar incidents have happened in the past, but the scale of Shinhan Investment's case is relatively large."
The FSS sees this issue as not only an individual failure but also a significant organizational problem at Shinhan Investment. Ham stated, "If team leaders and department heads collude, we cannot expect vertical control within the company. If risk management, compliance, and legal departments fail to function effectively, horizontal control is also compromised." He pointed out, "If neither vertical nor horizontal control is functioning, there is a critical design flaw in the company's operations," emphasizing that the organizational problems at Shinhan Investment are quite severe.
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
