Scandal-ridden securities firms to start next year with new CEOs

Lee Hong-ku, left, president nominee for KB Securities, and Eom Ju-sung, CEO nominee for Kiwoom Securities / Courtesy of each company

KB Securities, NH Investment & Securities and Kiwoom Securities are seeking to replace their leadership as a means to recover customer trust in the New Year following financial scandals involving their respective CEOs.

The three are among the nine biggest brokerage houses by market capitalization where their leaders’ tenure was initially set to expire early next year.

While all nine CEOs’ terms can normally be extended, the three all wanted to change their leadership “to restore a tarnished brand image,” according to an industry source, Friday.

It noted that KB Securities President and CEO Park Jeong-rim resigned after she was suspended from duty by the Financial Services Commission (FSC) in late November for failing to fulfill rules on internal controls regarding mis-selling of the now-defunct Lime and Optimus hedge funds.

The funds all turned out to be fraudulent financial products and inflicted loss of trillions of won on customers.

Concerning NH Investment & Securities, President and CEO Jeong Young-chae was slapped with a verbal warning by the FSC, also for failure of internal control with regard to mis-selling of Optimus.

Under the circumstances, KB Securities nominated Executive Vice President Lee Hong-ku to take over Park’s role. Lee awaits approval from the firm’s CEO recommendation committee members and shareholders within this month.

NH Investment & Securities said it is “in the middle of finding a CEO candidate,” who will need to win consent during an annual meeting of shareholders in January.

Kiwoom Securities President and CEO Hwang Hyun-soon stepped down after the firm was embroiled in stock price manipulation scandals linked to Youngpoong Paper and Ra Deok-yeon who headed an unregistered investment consulting firm.

Kiwoom Securities nominated Executive Vice President Eom Ju-sung as its next leader, with a shareholders’ meeting scheduled to make an official confirmation concerning his status.

Meanwhile, KB Securities and Kiwoom Securities both expressed hope for their respective CEO nominees.

Lee was highly valued for his expertise in wealth management and private banking. In particular, he was given credit for stabilizing the firm’s wealth management division after it was rocked by the Lime scandal.

Eom was noted for Kiwoom Securities’ principal investment, in which firms use their capital for transactions or asset acquisitions and have direct control over their investments.

Through such an investment strategy, firms can potentially reap more significant returns than when acting as intermediaries.