South Korea’s financial regulator plans to punish Goldman Sachs (GS:US) Group Inc.’s local unit and employees for breaking rules on sales of financial products.
The Financial Supervisory Service informed Goldman Sachs of its plans and will determine the penalty after hearing an explanation from the Wall Street firm, Cho Gook Hwan, director-general at the regulator, said by phone today. The penalty and the number of employees to be sanctioned will be decided later in a committee meeting, Cho said.
Three foreign brokerages have been under investigation as part of a review of derivative sales and other operations for compliance with local rules, the FSS said in September. A month later, it said it completed its investigation of Goldman Sachs. Credit Suisse Group AG (CSGN) and Royal Bank of Scotland Group Plc (RBS) were also being inspected, MoneyToday reported in September.
“This is part of the regulator’s routine job,” Jang Beom Sik, a business administration professor at Soongsil University in Seoul, said by phone today. “Regardless if it’s a foreign or local firm, regulators will be equally stern on any rule violation.”
Christopher Jun, a Seoul-based spokesman for Goldman Sachs, declined to comment on the FSS’s plans when reached by phone. Cho declined to comment on the outcome of inspections of Credit Suisse and RBS. Spokesmen at Credit Suisse and RBS said no immediate comments are available.
The regulator found that Goldman Sachs sold Malaysian government-backed bonds to South Korean investors through its Hong Kong office in violation of local rules, the Korea Economic Daily reported today, citing unidentified financial industry officials. Under Korean rules, sales and product recommendations should be made through licensed local units.
The FSS found no problem with the products sold by Goldman Sachs, Cho said today.
Regulators last month pledged to boost consumer protection even as they vowed to boost the competitiveness of the nation’s financial industry, according to a Nov. 27 statement from the Financial Services Commission.
South Korean prosecutors in August 2011 charged four Deutsche Bank AG employees -- three of them foreigners -- and its local brokerage unit with market manipulation that caused an equities rout on Nov. 11, 2010.
The Seoul Central District Court hasn’t made a ruling on the case, according to a document on the court’s website. Deutsche Bank was banned from trading shares and derivatives for its own account for six months from April 1, 2011.
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