FSS Expands JTBC Bond Probe to Hanyang Securities

South Korea's Financial Supervisory Service (FSS) expanded its inspection to Hanyang Securities on the 8th to investigate alleged mis-selling in JTBC corporate bond issuance and sales. The FSS had started inspections of Shinhan Investment & Securities, the lead underwriter for JTBC bonds, and Kiwoom Securities, which sold asset-backed short-term bonds (ABSTB) to retail investors, on the 2nd. The inspection expansion comes as JTBC defaulted on 20.6 billion won in securitized loans on the 12th of last month, triggering court receivership filings by major Central Group affiliates.

FSS Expands Inspection Six Days After Initial Probe

The FSS began on-site inspection of Hanyang Securities on the 8th, according to financial investment industry sources on the 10th. The regulator had initiated inspections of Shinhan Investment & Securities and Kiwoom Securities on the 2nd, expanding the scope six days later. Hanyang Securities participated as an underwriter in JTBC corporate bond issuances.

Hanyang Securities Underwrote 9.3 Billion Won in JTBC Bonds

Hanyang Securities underwrote 9.3 billion won of unsubscribed volume during institutional demand forecasting for a 50 billion won corporate bond issuance in August last year. The firm was also reportedly involved in the market distribution process of a 93 billion won corporate bond issued in February, four months before the default occurred.

FSS Reviews Underwriting Due Diligence and Risk Disclosure

The FSS is examining whether Hanyang Securities conducted sufficient due diligence on JTBC's financial deterioration and repayment risks before underwriting the bonds, and whether the firm properly disclosed related risks to investors. The inspection, which initially focused on the lead underwriter and retail seller, has expanded to underwriters, broadening the FSS review to cover the entire underwriting review process.

JTBC Defaulted on 20.6 Billion Won Loan

JTBC failed to repay 20.6 billion won in securitized loans on the 12th of last month, falling into default. Major Central Group affiliates subsequently filed for court receivership.

FAQ

What did the FSS do on the 8th regarding JTBC bonds?

The Financial Supervisory Service started on-site inspection of Hanyang Securities on the 8th to investigate alleged mis-selling in JTBC corporate bond issuance and sales.

How much did Hanyang Securities underwrite in JTBC bonds?

Hanyang Securities underwrote 9.3 billion won of unsubscribed volume during a 50 billion won JTBC corporate bond issuance in August last year, and was involved in the distribution of a 93 billion won bond issued in February.

When did JTBC default on its debt?

JTBC defaulted on 20.6 billion won in securitized loans on the 12th of last month.