[Alpha Biz= Paul Lee] South Korea’s financial authorities have issued “management caution” measures to six major securities firms over their practices related to underwriting and managing public corporate bond issuances, citing internal profit adjustments across departments.

According to the Financial Supervisory Service and industry sources on April 20, the regulator on April 7 disclosed four management advisory items for each of six firms, including Samsung Securities, Shinhan Investment, Mirae Asset Securities, Korea Investment & Securities, KB Securities, and NH Investment & Securities.

The key issue highlighted was the need to strengthen independence in underwriting and managing public corporate bond deals. The FSS found that investment banking (IB) divisions had been offsetting losses incurred by bond sales and trading units—particularly those participating in book-building—by reallocating underwriting and acquisition fees, effectively adjusting internal profits.

The regulator noted that such internal adjustments of underwriting fees and trading gains or losses between departments undermine fair market practices in the bond market. It recommended that firms refrain from operating separate “book limits” intended to facilitate the acquisition of bonds underwritten by the same firm.

The FSS also pointed out insufficient record-keeping during the process of selling allocated corporate bonds within a short period after issuance, identifying this as a common issue across the firms.

 

 

 

[ⓒ 알파경제. 무단전재-재배포 금지]