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South Korea's financial watchdog said Monday it had launched a special inspection into Samsung Securities, a local brokerage affiliated with Samsung Group, South Korea's largest family-controlled conglomerate, over the so-called ghost stocks.
The Financial Supervisory Service (FSS) said in a statement that it planned to inspect all stock trading systems of local securities firms after completing an on-site inspection into Samsung Securities.
The special inspection came as a Samsung Securities official mistakenly offered 2.81 billion shares in dividend under the employee stock ownership plan, instead of 2.81 billion won (2.63 million U.S. dollars) in dividend.
Among the mistakenly handed stocks, 16 Samsung Securities employees dumped 5.01 million shares in the domestic stock market Friday, shrinking the brokerage's share price by as much as 12 percent.
Questions were raised over the stock trading system of Samsung Securities as 2.81 billion shares, or about 31 times the total number of stocks issued by Samsung Securities at 89 million shares, were given out in dividend.
The financial watchdog will inspect how the ghost stocks, which were neither issued nor existed, could be sold in the local stock market.
The ghost stock incident also raised questions about naked short selling, which has been prohibited in South Korea since the global financial crisis erupted in 2008.
The naked short selling was blamed for stock market plunges as institutional traders sell stocks which they do not own. The covered short selling was allowed as it allows traders to sell borrowed stocks before returning them back when stock prices fall.
Concerns spread that with the ghost stocks, institutional traders could have continued the naked short selling even without borrowing stocks.
(ASIA PACIFIC DAILY)
