FSS Imposes Severe Sanction of "Suspension of Duties" on MBK Partners over "Homeplus Incident"

Original Prior Notice Maintained... Final Decision to Be Made at Financial Services Commission Meeting

The Financial Supervisory Service (FSS) has reportedly decided to impose severe disciplinary action, including a "work suspension," on MBK Partners in connection with the Homeplus case. If the heavy disciplinary measure is finalized through a meeting of the Financial Services Commission, this will mark the first time a General Partner (GP) of an institutional private equity fund has received such a penalty.

According to the FSS on July 3, the third Sanctions Review Committee was held the previous afternoon, during which the committee discussed the findings of the inspection into MBK Partners and reached this conclusion. Previously, the FSS issued a preliminary notice to MBK Partners regarding severe disciplinary action, including work suspension, and it is understood that the committee upheld this position during the review.

Yonhap News Agency

Under the Capital Markets Act, the disciplinary levels for a GP are: institutional caution, institutional warning, work suspension for up to six months, and dismissal request, in that order. Work suspension is a measure equivalent to a "business suspension" for asset managers, meaning new business activities are restricted. It has been reported that heavy disciplinary action, including work suspension for key executives, is also included.

However, the FSS did not disclose the level of disciplinary action on this day. An FSS official explained, "We discussed the proposed measures based on the MBK Partners inspection results and concluded the review," adding, "We plan to organize the details, including the level of sanctions, based on the review outcome and make a recommendation to the Financial Services Commission."

The results of the Sanctions Review Committee, which is an advisory body to the FSS, have no legal effect. Accordingly, the disciplinary measure will be finalized through a resolution by the Financial Services Commission. If the severe disciplinary action is confirmed, it is expected to inevitably affect future investments from the National Pension Service and others.

This decision came ahead of the deadline set by the Seoul Bankruptcy Court for the approval of the Homeplus rehabilitation plan. During the sanctions review, while many committee members agreed to uphold the original notice, there was also a cautious approach regarding whether illegality could be established.The main issues appear to be whether the waiver of the redemption right on redeemable convertible preferred shares (RCPS) damaged investor interests, and whether any third party benefited as a result.

Previously, the FSS held two Sanctions Review Committees in December last year and January this year, but was unable to reach a conclusion at the time.

This content was produced with the assistance of AI translation services.