FSS reaffirms ruling on BioLogics accounts

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FSS reaffirms ruling on BioLogics accounts

Samsung BioLogics’ accounting practices have been brought into question again after the country’s financial watchdog reaffirmed its previous ruling that the drug maker violated accounting rules.

The head of the Financial Supervisory Service (FSS) said on Wednesday that the service will submit the conclusion of its latest probe to BioLogics as early as this week, sticking with the initial decision despite the Financial Services Commission’s (FSC) request to review the determination.

“There will be no major difference,” said Yoon Suk-heun, the FSS chief. “We will send the preliminary result this week.”

The decision will then be referred to the Securities and Futures Commission (SFC) at the FSC in two weeks for final confirmation. With the FSS staying the course, the two regulators remain at odds over BioLogics.

The FSC, the country’s financial regulator, ordered the FSS in July to reassess a previous ruling that BioLogics breached accounting rules in 2015.

In its original decision, the FSS determined that BioLogics had intentionally altered the status of its subsidiary, Samsung Bioepis, to that of an affiliate to inflate its market value ahead of a listing in 2016.

Samsung BioLogics denied the allegation, saying that the change was part of a broad strategic maneuver. The unit is also accused of making omissions in its audited reports between 2012 and 2014.

In its July ruling, the FSC issued penalties for the missing information, saying that BioLogics kept quiet about a call option given to Biogen.

The call option contract gave Biogen the right to increase its share in Samsung Bioepis to 49.9 percent, a right that Biogen executed in June this year.

The FSS refrained from making any decision in the early probe but will likely impose its own ruling on the alleged infractions this time around.

The financial watchdog also announced a set of follow-up measures to tighten internal controls at financial institutions following a fat-finger trading error at Samsung Securities.

Under the proposed measures, the board of directors will be held accountable for any mishaps related to internal controls, including records maintenance, regulatory compliance and IT services.

“The board of directors will take responsibility for the lack of internal controls and devise related policies to prevent any accident,” said Ko Dong-won, a law professor at Sungkyunkwan University. He headed the FSS task force dedicated to devising policy for internal controls.

The FSS will also move to require banks and securities companies to give more compliance officers executive authority so that they will have greater operational influence.

The regulator can currently demand the elevation of compliance officials only for companies with more than 5 trillion won ($4.4 billion) in capital, but the FSS is considering a lowering of the criteria.

“I think the standard can go down to the 3 to 4 trillion won level,” Ko said.

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