Former Financial Supervisory Service Governor Lee Bok-hyun, in his first case since returning to law practice, will represent investors who took losses after investing in bonds issued by JoongAng Group affiliates including JTBC.
According to legal sources, Lee plans to sign a retainer agreement this week with the bond investors together with law firm Changcheon. Until now, Lee has focused more on advisory roles rather than taking individual cases, making this likely the first case he takes on directly since leaving office. He is said to be reviewing both an application to the Financial Supervisory Service (FSS) dispute mediation committee and civil and criminal litigation.
The key point of contention is whether bookrunners including Shinhan Investment & Securities and Kiwoom Securities properly identified and vetted the issuer's financial risks at the time of issuance. Before bringing bonds to market, the bookrunner is responsible for reviewing the issuer's cash flow, liability structure, and business outlook.
While heading the FSS, Lee directly led probes into major dispute cases such as the Hong Kong ELS (equity-linked securities) misselling scandal and the Homeplus Co. bond case. Investors, mindful that the matter could expand into civil and criminal arenas, are said to have asked Lee to take the case.
The investors believe they can invoke a similar Supreme Court precedent that broadly recognizes investor rights in this case. The investors argue that "in the process where a securities firm passed public offering bonds to a brokerage company and the brokerage company then sold them to individuals, the securities firm knew about the retail sales and condoned them."