South Korea’s Financial Supervisory Service (FSS) has urged Samsung Securities, the brokerage arm of the country’s largest conglomerate, to suspend some of its operations for six months amid a probe into a massive stock issuance error.
The financial regulator also asked Samsung Securities and other brokerages to strengthen their internal controls amid surging concerns over compliance protocols following one of the world’s largest “fat-finger” errors.
In South Korea, listed companies usually voluntarily suspend trading. The FSS rarely issues suspension orders unless it deems it necessary to protect the interest of investors. In addition, the final decision over the recommended partial suspension of the brokerage’s activity will be made by the Financial Services Commission (FSC).
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The fiasco occurred earlier in April when an employee at Samsung Securities mistakenly typed in 1,000 shares instead of 1,000 won ($0.94) per share in dividends that were meant to be paid out to employees under a company compensation plan.
As a result of the mistake, the company deposited 2.8 billion shares, worth nearly $105 billion, into employee accounts, which was more than 30 times the number of its outstanding market cap.
The brokerage house realized the mistake shortly after but failed to take immediate action.
The accident had caused a public outcry in South Korea, particularly after several major clients cut ties with Samsung Securities. The regulators also discovered that 16 workers sold 5 million shares, worth about $190 million, minutes after receiving them. Some others also attempted to make a profit from the error, but the brokerage managed to block them from selling the accidental shares.