Kiwoom chief comes under fire for suspicious stock sales

Kiwoom Securities President Hwang Hyun-soon answers questions from reporters at the Korea Financial Investment Association headquarters in Seoul, April 28. Yonhap

By Lee Min-hyung

Daou Kiwoom Group Chairman Kim Ik-rae

Daou Kiwoom Group Chairman Kim Ik-rae has angered investors with his suspicious sales of Daou Data shares, shortly before the stock's abrupt decline.

It remains unclear whether Kim is involved in the escalating stock scandal surrounding eight companies that experienced plummeting stock prices for no apparent reason. Daou Data is one of the firms hit hard by investors' unexpected selling spree last week. The company is also a subsidiary of Daou Kiwoom Group.

Kim sold 1.4 million Daou Data shares at 43,245 won ($32) per share on April 20 and secured 60.5 billion won. This was only two trading days before some investors engaged in the suspicious mass selling spree of the stock via the France-based Societe Generale. The stock price of Daou Data fell to around 17,000 won as of Monday, a drop of more than 60 percent before the incident erupted.

Kiwoom flatly denied the escalating suspicions, saying that it was just a “coincidence” that the Kiwoom chief sold the shares at that time.

“The group chairman planned to sell the shares just at that moment, and frankly speaking, was supposed to do so even before then,” Kiwoom Securities President Hwang Hyun-soon told reporters. “It was a coincidence. There stands a less than 0.0001 percent possibility that the chairman was aware of the ongoing stock manipulation scandal in advance.”

But suspicions surrounding Kim and the firm's involvement in the scandal show little sign of abating. In the past, he also engaged in a similar stock trading. Even if the two suspicious incidents do not have any direct relations, retail investors express frustration over the abrupt stock fall after Kim's mass selling of the firm's shares. Data from the Financial Supervisory Service (FSS) showed that Kim previously sold 1.33 million Daou Data shares for three trading days from Jan. 9, 2007, and its average sales price was 4,757 won per share. But the firm's stock price then went on a sharp decline, plunging to 2,960 won in less than two weeks after Kim's stock sales.

Kim is expected to be summoned for further investigation. The Seoul Southern District Court's joint investigation team is partnering with financial authorities to look into the stock manipulation scandal.

Authorities reiterated their willingness to sternly investigate any figures involved in the incident.

“Regardless of social status, we will push for thorough investigation of those involved,” FSS Governor Lee Bok-hyun said.

The Korea Stockholders Alliance also issued a statement Monday, urging financial authorities to look into Kim's suspicious stock trading.

“The latest incident was widely predicted, with stock manipulators making ill use of a contract for difference (CFD),” the statement said. A CFD refers to a risky leveraged derivative that allows investors to speculate on the opening and closing price of an asset.

“Relevant financial authorities such as the Financial Services Commission should also be held accountable for the incident in that they did not come up with countermeasures against the CFD.”