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| Securities and Futures Commission (SFC) head Kim Yong-beom speaks during a media conference at the Government Complex in Seoul, Wednesday. The SFC ruled Tuesday that Samsung BioLogics intentionally violated accounting rules in 2015 / Courtesy of Financial Services Commission |
By Jhoo Dong-chan
Samsung BioLogics may be forced out of the Seoul stock market after the nation's financial regulator ruled Wednesday that the biopharmaceutical arm of Samsung Group intentionally violated accounting rules in 2015.
At a press conference, Financial Services Commission (FSC) Vice Chairman Kim Yong-beom said the company purposely cooked its books by inflating net profits in 2015 before it went public in 2016.
Under the ruling, shares of Samsung BioLogics will be suspended from trading on the Seoul bourse from today, and the Korea Exchange (KRX) will look into the case for the next 15 days to decide whether the company violated its examination standards for listed firms.
If the KRX decides the firm violated the standards, Samsung BioLogics will be delisted. The company is the nation's fifth largest firm in terms of market capitalization estimated at around 22 trillion won ($19.3 billion).
The FSC also fined it 8 billion won, and recommended the dismissal of its CEO to take responsibility for the accounting breach.
"We have decided to file a complaint with the prosecution against Samsung BioLogics for violating accounting rules; while also fining the firm 8 billion won. We are also requesting Samsung BioLogics to immediately dismiss its CEO," said Kim, who is also head of the Securities and Futures Commission (SFC), the auditing unit of the FSC.
"The KRX will decide whether to delist Samsung BioLogics after considering the firm's transparency and the protection of its investors," he added. "It is impossible to prejudge the result now."
The FSC also decided to ban auditing firm Samjong KPMG from carrying out audits of Samsung BioLogics for the next five years.
Samsung BioLogics immediately protested the decision.
"We are certain Samsung BioLogics did not violate accounting rules," the company said in a press release. "We will file an administrative petition to prove our case."
It added Samsung BioLogics had already consulted with a number of accounting specialists over the issue. The Korea Institute of Certified Public Accountants also confirmed the firm did not breach the rules in 2016.
"We are very sorry for causing confusion to our investors. We will make every effort to show that we acted within the law. We will also continue to do our best to meet our investors and customers' demands."
The SFC looked into allegations that the biopharmaceutical company's sudden profit in 2015 following years of losses was because of fraudulent accounting. The news was released right before the firm's planned initial public offering.
The firm reported a net profit of 1.9 trillion won that year after changing the method used to calculate the value of its core affiliate Samsung Bioepis.
The possible accounting fraud claim first surfaced after a local activist group, the People's Solidarity for Participatory Democracy (PSPD), questioned the integrity of the company's 2015 books.
Thanks to the surging market value of Samsung Bioepis, its part owner Samsung BioLogics said it conducted a corporate valuation based on this instead of acquisition value, following the approval of copies of core biotech drugs. The PSPD argued that such a change violated Korea's accounting rules.
