South Korea Fines 15 Banks and Brokerages 1.63 Trillion Won in Record Bond Bid-Rigging Case
South Korea's Fair Trade Commission announced on Nov. 11 that it has fined 15 primary dealers a combined 1,626.575 billion won (about 1.63 trillion won, or $1.2 billion) and issued corrective orders for colluding in government bond auctions, the largest single-case fine in the commission's history. The 15 institutions comprise 10 securities firms and five banks.
The brokerages fined are Kyobo Securities, Daishin Securities, Meritz Securities, Mirae Asset Securities, Samsung Securities, Shinhan Investment, NH Investment & Securities, KB Securities, Kiwoom Securities and Korea Investment & Securities. The banks are KB Kookmin Bank, NH NongHyup Bank, IBK (Industrial Bank of Korea), Hana Bank and the Korea Development Bank. KB Securities drew the largest fine at about 332.2 billion won, followed by NH Investment & Securities at about 242.8 billion won and Mirae Asset Securities at about 214.8 billion won; seven institutions were fined more than 100 billion won each. The brokerages account for about 1.376 trillion won, roughly 85% of the total.
According to the commission, from January 2020 to June 2023 the 15 dealers exchanged bidding-yield information by phone and via Telegram in the final one to two minutes before deadlines in 150 government bond auctions, and in 145 of those auctions they went further and directly agreed on bidding yields and volumes. The commission found that the practice artificially blocked the decline in winning yields that competition would have produced, pushed government bond yields higher and caused losses to the national treasury; the auctions affected totaled about 54 trillion won.
The fines were calculated at a base rate of 4.5%, with a uniform 30% reduction after the commission partly accepted the firms' argument that not all related sales were illicit gains. The previous single-case record was the 1,031.1 billion won fine imposed on Qualcomm in 2016. The commission also decided to refer seven institutions with long participation and many auctions - Mirae Asset Securities, NH Investment & Securities, KB Securities, Kiwoom Securities, Korea Investment & Securities, IBK and the Korea Development Bank - to the Serious Crimes Investigation Agency for criminal complaint.
Primary dealers are designated by South Korea's finance minister: they receive preferential rights to underwrite government bonds and in return must keep quoting prices to support trading in the secondary market. The finance ministry said on Nov. 11 that whether to suspend or revoke the dealers' qualifications will be reviewed after the legal disposition becomes final. The firms are widely expected to file administrative suits at the Seoul High Court seeking cancellation of the fines, together with applications to suspend enforcement. The commission said the penalty is expected to foster effective competition in bond auctions and improve the efficiency of national fiscal management.
(Source: Korea Fair Trade Commission)
Source: Korea Fair Trade Commission
Published by GSM · USA (original Chinese edition)
Photo: 图：韩国首尔汝矣岛金融区天际线，韩国多数大型证券公司总部集中于此。照片：S h y numis，CC BY 4.0，取自 Wikimedia Commons。 / Photo: Skyline of Yeouido, Seoul's financial district, home to many of South Korea's largest brokerages. Photo by S h y numis, CC BY 4.0, via Wikimedia Commons.
