The Financial Supervisory Service (FSS) expanded its on-site inspection to Hanyang Securities to investigate allegations of misselling surrounding JoongAng Group affiliates' corporate bonds. After starting inspections of Shinhan Investment and Kiwoom Securities, it appears to be widening the review to the entire corporate bond underwriting process.
According to the investment industry on the 10th, the FSS began an on-site inspection of Hanyang Securities on the 8th. Hanyang Securities was among the securities firms that joined the underwriting syndicate for JTBC corporate bonds.
In August last year, when JTBC issued 50 billion won in corporate bonds, Hanyang Securities underwrote 9.3 billion won of the portion left unsold in institutional investor book-building. It is also known to have participated in the distribution of the 93 billion won in corporate bonds that JTBC issued in February.
The FSS is said to be focusing on whether Hanyang Securities sufficiently reviewed JTBC's financial condition and repayment capacity before underwriting the bonds, and whether it properly explained related risks to investors.
Earlier, on the 2nd, the FSS began on-site inspections of Shinhan Investment, the lead manager for the JTBC corporate bonds, and Kiwoom Securities, the seller of asset-backed short-term bonds (ABSTB). The scope of the inspection appears to be expanding to the entire process of corporate bond underwriting and sales.
JTBC declared a default after failing to repay 20.6 billion won in asset-backed borrowing fund last month. After that, five JoongAng Group affiliates, including JTBC, filed for rehabilitation with the Seoul Bankruptcy Court.
Retail investors claim misselling, saying securities firms did not sufficiently explain investment risks. JTBC's long-term credit rating was "BBB," the lowest within investment grade until just before the default.