The nation’s top three pension funds, including the National Pension Service, the government Employees Pension service, and the Private Pension service, have halted trading with Samsung Securities, which is under investigation by the financial authorities after the ‘Ghost Stock’ dividend crisis.
Should Samsung Securities receive heavy penalties from the financial authorities, it could be excluded from the selection of trading securities companies. Samsung Asset Management, a Samsung affiliate, is also likely to be hit as a result of Samsung Securities' decline in reputation.
With the suspension of the three major pension fund’s transactions, it is inevitable that Samsung Securities will lose its highly ranked position. The three major pension funds revealed on April 10th their decision not to conduct direct and indirect stock transactions with Samsung Securities. The Korea Teacher’s Credit Union and the Military Mutual Aid Association have also decided to halt stock transactions in all areas including direct and indirect (commission) operations with Samsung Securities.
The pension fund's decision to suspend transactions with the securities company usually comes when the sanctions of the financial authorities are confirmed. It is subject to internal risk management regulations or compliance.
It is unusual, however, for the financial authorities to decide to suspend transactions at the early stages of their investigation into Samsung Securities.
An official of a financial institution said, “The institutions are taking this issue seriously. At least, the financial authorities are expecting the level of sanctions to be at an institutional warning level.”
Some say Samsung Securities could be suspended. Other issues are also being raised over the responsibilities and future course actions of Chairman Koo Sung-hoon, who has been in office for less than a month.
If Samsung Securities is subjected to institutional warnings or institutional sanctions, resuming trading with pension funds would be difficult for the time being, as it is highly likely to be excluded from the trading securities firms.
Meanwhile, on April 6th, Samsung Securities issued 2.82 billion shares to its employees due to a mistake by one of its employees in the process of paying a cash dividend of 2.81 billion won.
At that time, 16 employees sold off some of the stock to the market. According to a survey by Samsung Securities, one employee disposed of 35 billion won worth of shares. Samsung Securities is expected to face a major civil action. On April 6th, the stock price of Samsung Securities dropped by about 12 percent.
The plunge in share prices caused damage to general investors who chose to sell stocks on the same day. Associate lawyer Cho Kye-chang said, “If the analysts who needed to communicate the correct market information to investors first soul out the stock that came in with ‘fat finger, it would be a ‘moral hazard’. We believe it would be a natural process for small shareholders to form a coalition to file a lawsuit to return illegal gains or to file a lawsuit against corporations for damages.”
