The Financial Supervisory Service is said to have decided on a heavy disciplinary action, including "suspension from duty," against MBK Partners in connection with the Homeplus Co. situation. This is the first time a heavy sanction has been decided for a general partner (GP) of an institution-only private equity fund.
According to the securities industry on the 3rd, the Financial Supervisory Service (FSS) discussed and reached a conclusion on the proposed measures following the inspection of MBK Partners at the third sanctions review committee held the previous day. According to the financial sector, the FSS is said to have maintained the heavy sanctions plan, including the pre-notified "suspension from duty."
Under the Financial Investment Services and Capital Markets Act, the disciplinary levels for a GP are ▲institutional caution ▲institutional warning ▲suspension from duty within six months ▲request for dismissal, in that order, and suspension from duty is a measure equivalent to a "business suspension," which restricts new business for an asset management company. It is also reported that heavy sanctions such as suspension from duty for key executives are included.
At the sanctions review, many Commissioners reportedly agreed to maintain the original pre-notified plan, but there was also caution over whether illegality could be recognized. The issues appear to include whether giving up the redemption right on redeemable convertible preferred shares (RCPS) harmed investors' interests, and whether any third party profited from it.
The Financial Supervisory Service (FSS) is said to have found that MBK Partners has suspected violations of unsound business practices and internal control obligations under the Financial Investment Services and Capital Markets Act. To acquire Homeplus Co., MBK Partners, through a special purpose company (SPC) it established, changed the RCPS terms in favor of Homeplus Co. and gave up the redemption right, and in the process, it viewed that investors (LPs) such as the National Pension Service had their chances of recovering their investments reduced, infringing on their interests.
The Financial Supervisory Service (FSS) held two sanctions review sessions in Dec. last year and Jan. this year, but the conclusion was delayed as legal review over the determination of illegality took time.
The Financial Supervisory Service (FSS) plans to compile the results of the sanctions review deliberations and recommend them to the Financial Services Commission. The disciplinary plan will be finalized after resolution by the Financial Services Commission (FSC).