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[Alpha Biz=(Chicago) Reporter Kim Jisun] A number of cases have been found in which securities firms have continued their illegal practices, such as transferring profits and losses from bond-type wrap accounts and specific money trusts to other customers by hundreds of billions of won.
The Financial Supervisory Service will provide major investigative authorities with allegations of possible professional malpractice against securities firms.
The Financial Supervisory Service released "bond-type rap and trust inspection results (preliminary)" data on the 17th and said it has confirmed violations related to the handling of business and a number of problems in risk management and internal control after conducting intensive inspections on the status of bond-type rap and trust affairs at nine securities firms, including Mirae Asset Securities Co., Hana Securities Co. and NH Investment & Securities Co. since May this year.
The Financial Supervisory Service inspection found that all nine securities firms have transferred gains and losses between customer accounts through illegal cross trading to achieve the target return on maturity accounts.
Securities Firm A sells commercial paper (CP) in the account of a maturing customer to Securities Firm B at a higher price than the market price, and instead buys similar CPs from other accounts of Securities Firm B from customer accounts that have not expired yet.
This type of transaction is repeated to achieve the principal and target return on the account when the contract expires or when there is a customer redemption request. According to the Financial Supervisory Service, a securities firm has transferred 500 billion won in losses to customers by selling certain customer account CPs to other customer accounts through a total of 6,000 linked and replacement transactions since July last year.
The Financial Supervisory Service plans to provide investigative authorities with major allegations of 30 related suspects as the act of passing on losses to customers through abnormal price transactions constitutes a possible breach of duty.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
