Mirae Asset hit with big fine for antitrust violations
The Mirae Asset Financial Group has been fined 4.39 billion won ($3.57 million) by the Fair Trade Commission (FTC) for funneling business to a company controlled by the group’s founder and his family.
A total of 12 companies in the group were penalized, including Mirae Asset Consulting, which received business, and 11 companies shifting the business to that entity. Mirae Asset Consulting has stakes, direct and indirect, in all the companies cited.
Despite the fines, the group dodged a bullet, as the case will not be referred to the prosecution for criminal charges.
The 11 companies fined by the FTC include Mirae Asset Daewoo, Mirae Asset Global Investment and Mirae Asset Life Insurance. They were found by the commission to have excessively used the Blue Mountain Country Club in Gangwon and the Four Seasons Hotel Seoul, both of which are managed by Mirae Asset Consulting.
Between 2015 and 2017, a total of 29.7 billion won of transactions were made between the related companies and the golf club, while a total of 13.3 billion won of business was conducted between the parties and the hotel. The companies not only visited these establishments but also purchased memberships.
The FTC estimates that the 43 billion won in transactions that were made with these two venues by Mirae Asset companies accounted for 23.7 percent of the total 181.9 billion won in revenue during the same period.
The antitrust agency said 72 percent of the golf club’s business in 2016 was from Mirae Asset companies, helping the golf club to turn a profit in just three years of opening.
Mirae Asset Consulting’s revenue rose from 17.6 billion won in 2014 to 110 billion won in 2017.
Mirae Asset Group founder and chairman Park Hyeon-joo and his family own nearly 92 percent of the company. Park alone owns 48.63 percent, while his wife owns 10.24 percent and his three children each own 8.19 percent. Other relatives own a combined 8.43 percent stake.
The consulting company owns 32.9 percent of Mirae Asset Global Investments and 9.9 percent of Mirae Asset Capital, which owns 18.1 percent of Mirae Asset Daewoo. Park himself has direct stakes in the first two.
Under Korean antitrust laws, business group with assets exceeding 5 trillion won can only conduct certain related-party transactions after carefully considering the price and conditions of the transactions. The Mirae Asset Group did not take those steps, according to the FTC.
Those violating the regulations are fined 2 percent to 5 percent of the offending transactions.
Mirae Asset in a statement on Wednesday said any antitrust violations were unintentional. It added that it is currently working on strengthening the compliance process in regards to transactions among related companies and that it will actively review additional requests made by the FTC.
The FTC’s decision not to send the case to the prosecutors will allow the group to enter the commercial paper and investment management account (IMA) markets, which it has been seeking to enter since 2017. While the Mirae Asset Group applied for FTC approval in 2017, the antitrust agency has suspended its decision citing the ongoing investigation.
In 2017, the government revised the Capital Market and Financial Investment Business Act allowing large brokerages with capital of 4 trillion won or more to issue commercial paper with a maturity of less than one year. Brokerage firms with capital of 8 trillion won or more can provide corporate loans using customer money through IMAs.
Those that are approved by the authority can issue commercial paper totaling up to 200 percent of capital. As of April, commercial paper issued by brokerage firms since the first issuance in November 2017 amounted to 16.6 trillion won. This year alone, nearly 4 trillion won worth of commercial paper has been issued, a sharp rise from the 12.9 trillion won at the end of 2019.
It has been reported that the impact of the coronavirus pandemic has driven many companies to seek funding via brokerage firm-arranged commercial paper. Record low rates have helped the popularity of the financing.
Currently the commercial paper market is dominated by Korea Investment Securities, NH Investment & Securities and KB Securities. Korea Investment Securities leads with an issuance balance of 8.2 trillion won, followed by NH Investment & Securities at 4.5 trillion won and KB at 3.4 trillion won.
BY LEE HO-JEONG [firstname.lastname@example.org]
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