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Ex-Meritz Fire CEO accused of insider trading over merger plan
Meritz Financial Group's headquarters in Seoul / Courtesy of Meritz Financial Group
By Jun Ji-hye
Crackdown intensifies on stock manipulators after president's stern warning
Financial authorities are ramping up enforcement against individuals suspected of disrupting capital markets, following President Lee Jae Myung's warning of tough penalties for market manipulation, officials said Thursday.
The Financial Services Commission (FSC), the country's top financial regulator, said that its Securities and Futures Commission (SFC) has referred the former CEO of Meritz Fire & Marine Insurance to prosecutors for allegedly profiting from undisclosed merger information.
The SFC also referred Bang Si-hyuk, founder and chairman of HYBE, the K-pop powerhouse behind BTS, to prosecutors for allegedly misleading investors during the company's initial public offering and gaining unlawful profits.
During a meeting on Wednesday, the SFC decided to refer a former CEO-level official and another senior executive from Meritz Fire to the prosecution on charges of using nonpublic, material information.
Referring suspects to prosecutors represents the harshest penalty available to financial authorities under the Capital Markets Act.
They are accused of buying a significant amount of stock before Meritz Financial Group's merger plan was made public, then selling it after the price jumped, earning billions of won in illicit gains.
On Nov. 21, 2022, the financial group unveiled its plan to merge with its listed subsidiaries, Meritz Fire and Meritz Securities, by making them wholly owned. The merger involved issuing new shares in exchange for existing ones, effectively delisting the two firms. The group also announced a major share buyback and cancellation. The next day, all three stocks surged to their daily upper limits.
The individuals insisted they had purchased the shares without knowledge of the merger plan, but the regulator emphasized that senior executives at financial firms must be held to higher standards.
"We have taken disciplinary action against those involved, including relieving them of their duties, and will take all necessary steps to prevent a recurrence," a Meritz Financial official said.
Meanwhile, the SFC has also finalized its decision to refer Bang to prosecutors, accusing him of deceiving existing investors during HYBE's listing process by falsely claiming there were no plans to go public, leading them to sell their shares, and subsequently reaping about 200 billion won ($143 million) in profits.