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| The logo of Kiwoom Securities on display in front of its headquarters in Seoul, Wednesday. Yonhap |
Kiwoom shares nosedive on widening scandal
By Lee Min-hyung
Korea's top financial watchdog has launched an investigation into Kiwoom Securities to look into whether the company engaged in unfair sales of a contract for difference (CFD).
The risky leveraged derivative is considered to have driven the latest stock manipulation scandal which incurred combined losses of around 8 trillion won within only four days late last month. Eight listed shares were hit hardest by the abrupt stock fall after some investors entered a selling spree of the shares via France-based Societe Generale.
The Financial Supervisory Service (FSS) inspected Kiwoom Securities' CFD sales activities on Wednesday morning and plans to also inspect other major securities firms here.
Kiwoom Securities is standing at the center of criticism, with Daou Kiwoom Group Chairman Kim Ik-rae mired in the latest controversy due to his suspicious selling of Daou Data shares, which suffered a sharp decline only two trading days after Kim's selling spree. The financial watchdog is also known to be examining whether Kim is involved in the latest incident.
The Kiwoom chief and Ra Deok-yeon, chief of a Seoul-based investment advisory firm, are two controversial figures in the scandal. Both sides blamed each other and claimed no responsibility for the scandalous stock crash. A joint investigation team consisting of the prosecution, the FSS and the Financial Services Commission (FSC) is tracking the funds of key suspects.
Shares of Kiwoom Securities went on a losing streak on Wednesday. The shares widened losses for the past week on growing suspicions of Kim's influence in the recent controversy. The company closed with a loss of 1,000 won or 1.1 percent at 90,100 won per share.
Kiwoom Securities' plan to become a super-large investment bank also hit a snag due to the leadership crisis and its tainted corporate image. The company was scheduled to apply for a license to win the status of a super-large investment bank in the first half of 2023. Any brokerage house with equity capital worth more than 4 trillion won can win the status from financial authorities. Kiwoom Securities was also qualified for the application with capital of around 4.07 trillion won as of the end of 2022.
But with Kim mired in the scandal and feared to face further investigations, the Kiwoom affiliate will be unable to push for the drive. Investors also share pessimistic views about the brokerage.
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