Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Korea Investment CEO's fate uncertain amid unfair trade controversies
Korea Investment & Securities CEO Jung Il-mun, right, takes an oath as he attends a parliamentary audit session at the National Assembly in Seoul, Thursday. Yonhap
By Anna J. Park
Tainted public image, mounting project financing risks cloud Korea's leading brokerage
Korea Investment & Securities CEO Jung Il-mun was grilled by lawmakers at a parliamentary audit session on Thursday over allegations that the company engaged in unfair trade practices as well as technology theft from a startup company.
Jung was summoned to testify on behalf of the firm regarding the allegations during the parliament's audit session over the Fair Trade Commission (FTC), the state-run agency regulating trade practices.
At the session, Rep. Yun Chang-hyun of the ruling People Power Party (PPP) asked Jung about the allegations surrounding Indexmine, a local fintech startup, claiming it did not properly receive the agency fee and was robbed of its key technology by the brokerage firm. Jung responded, saying that the payment was made according to the contract.
"Indexmine claimed that it spent a maximum of 4.6 billion won ($3.4 million) while acting as an agent for Korea Investment & Securities’ customer-tailored promotions as well as for the brokerage firm's real-time order transactional work,” Rep. Yun said to Jung. “Korea Investment & Securities only paid a meager 18 million won to Indexmine for the services from April 2020 to December 2022. Isn’t it an abuse of power wielded by your firm?"
Jung refuted that Korea Investment and Indexmmine mutually agreed that the contract fee would be 3 million won per month, adding that Korea Investment is the second-largest shareholder of the startup firm.
Jung also denied the allegation of technology theft, saying the services provided by Indexmine and the mobile brokerage platform operated by Korea Investment are based on two distinct technologies.
Despite Korea Investment's complete denials of the allegations, doubts have not been resolved over the matter given the inconsistencies between the two sides' positions.
During the parliamentary session, FTC Chairperson Han Ki-jeong said that the unfair contract termination by Korea Investment is being reported to the FTC. With an in-depth FTC investigation expected in the future, one political source pointed out that the head of Korea Investment may be held accountable for his testimony at the parliament if the results of the investigation contradict his claims.
CEO's next term in jeopardy
Now the market's attention is on whether the CEO can succeed in securing another term in the top spot at the brokerage firm, with the term slated to end next March. Jung is a long-serving CEO, having taken the helm of the company back in 2019 and served five consecutive terms since.
But his prospects for another term are murky, given unresolved suspicions over unfair trade practices.
In addition, mounting risks over the brokerage firm's real estate project financing, as well as hefty performance bonuses paid for real estate project financing investments, could burden the firm, thereby leading to an increased possibility of insolvency, adding pressure on Jung's future and the firm's future earnings.
According to Rep. Lee Yong-woo, a lawmaker from the main opposition Democratic Party of Korea, earlier this week, Korea Investment & Securities paid 141.1 billion won in performance bonuses to officials in the real estate project financing department from 2019 to 2022. This easily surpasses the average of local securities firms, which paid 94.6 billion won for the same purpose. The amount of bonuses paid to one executive or employee was the largest among securities companies.
The problem is that Korea Investment & Securities is likely to suffer losses in the real estate project financing business. The firm's project financing credit extension amounted to 2.25 trillion won, as of Monday, an increase of 16.9 percent compared to the end of last year.
There's an argument that performance bonuses paid for investments likely to be insolvent should be recovered. Although it may not be realistically feasible, the CEO may be held accountable for his management strategy focusing only on short-term achievements.