FSS restarts review of BioLogics

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FSS restarts review of BioLogics

Korea’s financial watchdog has resumed its review of accounting practices at Samsung BioLogics, reigniting a long-running dispute between the drugmaker and the Financial Supervisory Service (FSS).

Confirmation of the renewed probe pushed down the stock price of BioLogics on Thursday by 3.5 percent to 440,000 won ($390).

The move came after the Financial Services Commission (FSC), the country’s financial regulator, ordered the FSS last month to reassess a previous ruling that BioLogics breached accounting rules in 2015.

Yoon Suk-heun, head of the FSS, confirmed on Thursday that the FSS began a new review to verify whether BioLogics intentionally switched the status of its subsidiary, Bioepis, to that of an affiliate to inflate its value ahead of a market listing in 2016.

Yoon hinted that the result of the ongoing review could be different from the initial ruling, which found BioLogics guilty.

“We will now leave diverse possibilities open,” he said.

Yoon declined to specify the time frame for the audit, saying that “It could take some time, but we will try to finish it as soon as possible.”

Multiple media outlets reported that the FSS intends to complete the review by the end of this year.

In its final ruling in July, the FSC handed out penalties on a separate but related case on information that was missing in BioLogics’ audit reports between 2012 and 2014. It said that BioLogics kept quiet about the call option given to U.S. biotech Biogen, which gave it the ability to increase its share in Samsung Bioepis during the period.

The FSC, however, never determined whether BioLogics deliberately changed the status of Samsung Bioepis from a subsidiary to an affiliate in order to inflate its valuation ahead of a planned public listing, as the Financial Supervisory Service (FSS) claimed.

The FSS chief also touched upon several other thorny issues during a luncheon with reporters. One of the central issues that dominated the press event was a dispute over immediate payment annuity plans that pitted Samsung Life Insurance against the FSS.

Yoon reiterated that the life insurer should compensate policyholders because it deducted part of the annuity payouts as a working expense without specifically mentioning it in contracts.

“Both banks and insurers need working expenses and can take out expenses,” Yoon said, “But the thing that matters is how they notified consumers [of their policies regarding the expenses]. It is inappropriate to pass on costs to the consumers in an unfair way.”

The head also stuck to the FSS stance that Samsung Life Insurance should compensate all subscribers to the annuity plan.

Samsung Life Insurance brushed off the request and filed a civil suit with the Seoul Central District Court earlier this week to nullify the policyholder’s demand for compensation.

Yoon also said that the watchdog will embark on a comprehensive oversight probe in the fourth quarter of the year but declined to mention which company would be his first target.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]
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