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| Ra Deok-yeon, the head of an unregistered investment consulting firm who allegedly orchestrated a stock manipulation scam, heads to the prosecution in southern Seoul, June 11. Newsis |
By Lee Yeon-woo
Tension is rising in the financial industry as prosecutors seek to arrest an incumbent executive of a securities firm suspected of involvement in a recent stock manipulation scam. Financial authorities warned CEOs to take full responsibility for such illicit activities and improve internal controls.
"We can no longer attribute illicit activities related to customer asset management and operations to individual misconduct or unavoidable business practices. We will deal sternly with business practices premised on illegal actions," Hahm Yong-il, senior deputy governor of the Financial Supervisory Service (FSS), said during his meeting with 27 CEOs of securities firms here on Wednesday.
"If none of the departments, including compliance, risk management and auditing, could filter out illegal activities, this indicates a very serious problem where the company-wide internal control system did not function normally. It's impossible to claim that this issue is unrelated to the top management, who are ultimately responsible for internal control."
According to the prosecution, Wednesday, it sought an arrest warrant for an executive from a securities firm, identified only by his surname Han. He allegedly lent customers' investments, worth 13 billion won ($10 million), along with stock accounts to Ra Deok-yeon in exchange for billions of won in bribes.
Ra, the head of an unregistered investment consulting firm, is currently under investigation on suspicion of orchestrating the manipulation of nine listed stocks with mass sell-offs via SG Securities Korea.
The previous assumption that neither current nor former employees of securities firms were directly implicated in this case has now been challenged. This has led each securities firm to increase their vigilance and actively assess whether any of their staff might have been involved in stock manipulation.
Market watchers estimate that more former or current employees related to the scandal may be disclosed in the future, as the prosecution's investigation is now in full swing.
"In case of allegations as severe as those leveled against Han, he should have been aware of his involvement in the scheme," an official from a securities firm said. "This suggests that the internal controls of the securities firm failed to operate effectively."
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