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Industry-wide probe initiated after Samsung Sec error, company vows relief

2018.04.09 14:06:09 | 2018.04.09 15:57:26
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The Financial Supervisory Service (FSS) on Monday embarked on industry-wide investigation on trading practices of all brokerage houses active in Korea while it is on a special investigation on Samsung Securities Co. that had caused a bizarre mayhem on the market on Friday through what it called a computer foul-up.

Samsung Securities shares went on a rollercoaster ride during Friday session after the company wired 1,000 shares instead of 1,000 won in cash for annual dividends for each employee holding. The shares involved 2.8 billion shares worth 112.6 trillion won ($104.8 billion).

The Financial Services Commission (FSC) convened an emergency meeting on Sunday to discuss measures to look into internal management system of the brokerage house.

“Given the stock price plunge of 12 percent during the day, we cannot take the incident lightly,” said FSC Vice Chairman Kim Yong-beom.

“The fiasco undermines confidence in stock trading in general. All the government offices will join forces to ensure such incidents do not happen and damage investors,” he said.

Samsung Securities that tumbled 12 percent during Friday ended down 3.64 percent at 38,350 won. On Monday, they fell 3 percent and closed at 37,200 won.

Samsung Securities immediately issued an apology, vowing a relief program for any investor losses on top of taking punitive and remedial actions on its system and staff. It offered to compensate for the losses when investors report them so that they need not have to take separate legal actions for damages.

The mega blunder was triggered by a keyboard input error, according to the firm, that put “shares” instead of “won” when sending dividends to shareholding employees. The error has been fixed, but it was only after some employees had already unloaded the shares. Questions have been raised as to how the employees could have sold the stocks that did not actually exist on the market. The company could face a serious penalty if it is found guilty of naked short-selling that has been banned since 2008. Unlike the legitimate short sale, naked short-seller is not required to borrow the securities in time to make a delivery.

Financial authorities will conduct an industry-wide inspection on all securities companies to check their computing systems and internal management capabilities. “All brokerage houses including foreign-based ones will be subject to the probe to find out whether there are risk factors that could cause market disruption and unfair transactions,” said an official from the financial authority.

By Han Ye-kyung and Choi Mira

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]

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