Multiple private equity firms engaged in fraud, bribery, FSS says
The Financial Supervisory Service (FSS) announced Thursday that it has spotted illegal or dubious business practices at several private equity firms during the course of planned inspections at those firms, including setting up fraudulent funds and bribery.
The FSS set up a dedicated team to inspect 233 local private equity firms in July after massive financial scandals involving Lime Asset Management and Optimus Asset Management caused investors to lose trillions of won.
The team consists of 32 staff members from the FSS as well as related institutions, including the Korea Deposit Insurance Corporation and Korea Securities Finance Corporation. As of Thursday, it had inspected 18 of the 233.
Among the cases spotted by the special team, the FSS said managers at one private equity firm bought unlisted stocks managed by its own funds at cheap prices, under the names of their spouses, then sold them at double the price.
A manager from another company invested in company A through its funds even after finding out the company has not been using the invested money as intended, and subsequently lost investors' money.
Some were also caught accepting bribes.
Others were found to have operated funds without assessing the risks, which could lead to investors being exposed to high-risk financial products.
The FSS said it will try its best to quickly impose sanctions on companies that it has caught, and will cooperate with the prosecution if needed.
As for companies linked to highly unethical business activities, the FSS is already monitoring their trading records on a day-to-day basis, it said.
The FSS report Thursday, however, stated that the findings don’t necessarily mean all private equity firms are pursuing unethical business practices, as the first companies to be inspected are from the list of companies linked to funds that were suspended, along with those that own more nonmarketable securities.
The activity that the FSS spotted, though inappropriate, also hasn't resulted in massive investor damage like in the previous case with Lime and Optimus, FSS Gov. Yoon Suk-heun explained during an online press conference Wednesday.
The special team plans to complete its inspections of all 233 private equity firms through 2023. Yoon said that while the team is currently a temporary unit, the FSS is considering making it regular as the team’s job is linked to protecting investors from substantial damage.
BY KIM JEE-HEE [email@example.com]
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