All Securities Companies ‘Corporate Analysis’ On-the-Spot Investigation

Financial Supervisory Service (FSS) started a large on-the-spot investigation to inquire into a violation of regulations after completing a basic investigation on unfair acts of securities analysts and investment advisors.

This investigation has been performed closely and thoroughly until the beginning of September when the sanctions against UBS Warburg Securities, which drained out the business report of Samsung Electronics in advance, will be published.

The FSS said on August 11, “We will investigate whether the securities analysts and investment advisors distributed the analysis data to some institutional investors in advance, but didn’t announce this fact officially, or whether the securities companies made a dealing by using this data.”

The FSS said, “We will investigate all securities companies which write the analysis and advisory reports and will inspect the reports issued from the last May entirely.”

The official of the FSS said “We already performed the preliminary investigation on several companies which were suspected of the unfair acts related to the analysis and advisory reports.” He hinted at this stubborn special investigation.

The securities stipulate that they cannot make the dealing for 24 hours before and after submitting the analyst report. However, some securities companies are suspected of that they had the dealing for this time and so made the unfair profits.

The securities’ data requested by the FSS include a recommender, recommendation date, recommendation cause and items proposed in the analysis and advisory reports issued after last May. Also, the FSS requested to submit the writing date & reporting date of the report and e-mail status of analysts.

Some securities companies rebelled “This request of the FSS is unreasonable.”

The analysts of ‘A’ Securities complained “I am so embarrassed as the FSS request the one year-previous data. I understand the purpose of the FSS to exterminate the unfair acts, but the sound investment research of the analysts must not be shrunk through this investigation.”

Besides, Financial Supervisory Commission (FSC) will announce the results through the sanction deliberation committee on August 16, after completing the investigation on UBS Warburg Securities, which drained out the business report of Samsung Electronics in advance. Lee Keun-Young, the Chairman of the Financial Supervisory Commission (FSC) said, “As the foreign financial market has watched this investigation results carefully, we will publish the violation thoroughly.”

Dong-Won Kim daviskim@donga.com