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Byung-Joo Kim, Chairman of MBK Partners (Photo = Yonhap News) |
[Alpha Biz= Kim Jisun] The Financial Supervisory Service (FSS) has issued a preliminary notice of heavy sanctions against MBK Partners in connection with the so-called “Homeplus incident.” It marks the first time the regulator has moved to impose a severe penalty on the general partner (GP) of an institutional-only private equity fund.
According to financial industry sources on the 23rd, the FSS notified MBK Partners on the 21st of its intention to impose a sanction that includes suspension of duties. During its inspection, the FSS reportedly uncovered evidence of unsound business practices and internal control failures.
The regulator has been investigating whether changes made to the redemption terms of Homeplus’s redeemable convertible preferred shares (RCPS) — after the retailer’s credit rating downgrade — may have harmed investor (LP) interests, including those of the National Pension Service (NPS), which invested KRW 582.6 billion.
Under the Capital Markets Act, sanctions against a GP can include:
Institutional caution
Institutional warning
Suspension of duties for up to six months
Recommendation for dismissal
Following the preliminary notice, the FSS sanctions review committee will convene within about a month. Any sanction at the level of duty suspension or higher requires final approval from the Financial Services Commission (FSC). The FSS had initially deferred action pending the outcome of a separate criminal investigation but reconsidered the case in full following the appointment of FSS Governor Lee Chan-jin.
The response of the National Pension Service—one of Korea’s most influential institutional investors—is also drawing attention. According to NPS’ guidelines for domestic private equity manager selection and supervision, any manager receiving an institutional warning or higher due to legal violations may be disqualified or removed from the NPS mandate. Should the NPS revoke MBK’s mandate, other pension funds and institutional investors may follow suit, potentially triggering broader market repercussions.
Additional sanctions may be considered depending on the results of the ongoing prosecutorial investigation. Prosecutors are currently examining whether MBK Partners concealed Homeplus’s intention to seek court receivership and misled investors when issuing KRW 600 billion in short-term bonds.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
