[EDITORIALS]Find the truth about HermesThe prosecution has banned an employee of a Korean securities firm from leaving the country in connection with an investigation into possible illegal stock price manipulation by a London-based equity fund, Hermes Investment Management Ltd. The man is suspected of spreading rumors of a possible hostile merger or acquisition of Samsung Corp. by Hermes by arranging a press interview with a Hermes fund manger.
Allegedly, Hermes had selectively bought Samsung Corp. shares since November 2003, and then boosted their value by making seven leaks to the press about a possible merger or acquisition. According to the Securities and Futures Commission, Hermes sold all its Samsung shares on Dec. 3, 2004, right after an interview with a newspaper, for a profit of 29.2 billion won ($28.5 million).
Hermes has denied that one of its former fund managers attempted to manipulate share prices through press reports. But the commission said Hermes is strongly suspected of manipulating the price, because it made several such leaks to the press even before the press interview in question.
The truth should be disclosed by way of a thorough investigation by the prosecution. What matters here is that the Korean stock market has been exposed without protection to speculative investment by foreign equity funds.
Foreign investors, whose market share exceeds 40 percent, have been already exercising significant influence in Korean securities transactions. Although it is fortunate that the financial watchdog has taken strong punitive action this time, there is no knowing how much illegality and expediency was committed in the past.
Taking this opportunity, the financial authorities must prevent confusion in the domestic capital market by applying related Korean law strictly against illegalities committed by foreign funds. Since Korea’s capital market is open, it is not desirable to shun or discriminate foreign funds that enter the Korean market through proper procedures. By the same reasoning, they should also not be allowed to enjoy previleges, or to employ illegal or expedient practices.
At the same time, the Korean press must guard against the chance that, by being overly competitive for hot stories, they could be used by foreign funds in attempts to disturb the market.