Gov’t delay cost Tongyang clients

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Gov’t delay cost Tongyang clients

More than 20,000 individuals could have been saved from falling victim to debt-ridden Tongyang Group if the financial regulator had acted sooner.

According to Representative Kang Gi-jung of the main opposition Democratic Party yesterday, 44,563 individuals had invested in Tongyang Group affiliates’ corporate bonds and commercial paper through Tongyang Securities as of July 24. Of them, 50.2 percent, or 22,351, invested more money from July 24 to Sept. 30.

Figures revealed by Kang were from Financial Supervisory Service data given to the him ahead of the parliamentary audit session yesterday.

Last November, the Financial Services Commission announced a change in the Financial Investment Act that bans brokerages from selling corporate bonds and commercial paper of affiliates with credit ratings of BB+ or lower to retail investors. The amendment was supposed to go into effect in July but was delayed to Oct. 24.

The government believed that because the country’s overall corporate bond market was sluggish, enacting the amendment would be a hindrance that would make it even harder for small and midsize companies to raise funds.

When the Tongyang Group crisis surfaced in late September with five affiliates filing for court receivership, lawmakers and civic groups accused the government of dragging its feet to help the debt-ridden conglomerate raise funds to repay maturing debt without having to turn to court. “The crisis occurred because of an unethical company and a poor financial system,” Kang said. “The country’s financial regulator should strictly look into unfair selling of Tongyang Group affiliates’ corporate bonds and commercial paper and try to build a healthier financial system that would prevent similar crises from happening in the future.”

BY LEE EUN-JOO [angie@joongang.co.kr]
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