Investigation on Manipulation of CB and Forfeited Shares

The Financial Supervisory Service (FSS) launched the investigation on the stock price manipulation of the companies, related to the issue of the convertible bonds (CB) popularized by the `Lee Yong-Ho Gate`, and the over-allocation of the forfeited shares to the third person.

Considering the evaluation that the item-oriented investigation has been inefficient in deterring the stock price manipulation by such suspects as Lee Yong-Ho, president of G & G, the FSS decided to conduct the person-oriented investigation together.

An official of the FSS announced the FSS`s investigation plan, saying that ``Recently, the FSS almost finished the investigations on the piled cases taking over from the Korea Stock Exchange (KSE) and the Korea Securities Dealers Association (KSDA). Thus it can actively take on an investigation by each theme.``

The official said, ``The FSS places the priority on the investigation of the CBs and the forfeited shares in this investigation project, and it will conduct an investigation on one or two suspect companies that have issued the CBs.`` The CB has been called as a blind spot of the supervision because the CB is prescribed to report its purchasers only to the issuing country.

The FSS included in the investigation, in the first place, the companies that have sold the CBs to the domestic investors by colluding with the domestic financial institutions in spite of lacking the ability to sell them to the foreign investors. And it will also plan to probe the companies that have sold the forfeited shares to the third persons for their scrap value, as they failed to sell them to the general investors through the capital increase with consideration.

And the FSS established the plan to examine the stocks related to the companies under the work-out program within this year.

A FSS official said, ``The FSS will probe the companies that have manipulated the stock prices of the ailing companies by promulgating the early graduation from the work-out program or by quick pull-out.``

Kim Seung-Ryun srkim@donga.com