South Korea's Fair Trade Commission requested 15 primary dealers to recalculate sales using operating income instead of bond amounts. Industry sources reported the development on May 28. This marks the first such request since the FTC began investigating alleged bid-rigging in government bond auctions. Industry participants argue the regulator should apply the same standard used in a prior securities firm collusion case, where operating income served as the basis. The FTC has been probing primary dealers since 2023 over allegations they coordinated bidding to inflate interest rates.
FTC Shifts Fine Calculation Basis to Operating Income
The Fair Trade Commission asked the 15 primary dealers — comprising 10 securities firms and 5 banks — to submit sales figures calculated on an operating income basis rather than the total value of winning bids in government bond auctions. An official at a securities firm confirmed receiving the request, stating, "It is correct that we received guidance to calculate and submit sales based on operating income. We believe the FTC is trying to interpret broadly by considering the industry's arguments."
The FTC had previously considered applying a fine rate of 10-15% to the dealers' government bond winning bid amounts during the alleged collusion period. With the FTC's calculated sales figure of approximately 76 trillion won, fines under that methodology would have reached 7-11 trillion won. Industry sources view the operating income request as a signal that the record-breaking fine amount may be avoided.
Primary Dealers Begin Sales Recalculation
All 15 firms have begun recalculating their sales figures based on operating income in response to the FTC's request. The industry has consistently argued that the FTC should apply the same standard used in a case involving 20 securities firms accused of small bond collusion, where financial institutions' sales were treated as operating income. Industry participants maintain that identical criteria should apply to the current government bond case.
Investigation Targets 76 Trillion Won in Bond Auction Sales
The FTC launched its investigation in 2023 into primary dealer securities firms and banks over allegations of collusive bidding practices. Authorities suspect the dealers shared bidding plans in advance during government bond auctions to secure improper profits by inflating interest rates. The FTC calculated the total winning bid amounts for the 15 primary dealers during the alleged collusion period at approximately 76 trillion won.
FTC Plenary Meetings Scheduled for Next Month
The FTC has scheduled three plenary meetings for next month to address the government bond bid-rigging case involving the 15 financial firms. Each company has been notified of its attendance schedule and is currently preparing for the proceedings.
FAQ
What did South Korea's Fair Trade Commission request from primary dealers on May 28?
The FTC requested 15 primary dealers — 10 securities firms and 5 banks — to recalculate and submit sales figures based on operating income rather than government bond winning bid amounts. This marked the first such data request since the FTC began investigating alleged bid-rigging in government bond auctions.
Why are industry participants recalculating sales figures based on operating income?
Industry participants argue the FTC should apply the same standard used in a prior case involving 20 securities firms accused of small bond collusion, where operating income served as the basis for calculating fines. The 15 firms began recalculation work immediately after receiving the FTC's request, viewing it as a potential pathway to significantly reduced fines compared to the initially estimated 7-11 trillion won.
How much were the original estimated fines in the government bond bid-rigging case?
The FTC had considered applying a 10-15% fine rate to approximately 76 trillion won in government bond winning bid amounts during the alleged collusion period. Under that methodology, total fines would have reached 7-11 trillion won, representing a record-breaking penalty amount.
