Sanction on Elliot
According to financial investment industry sources on Jan. 10, the Financial Supervisory Service (FSS) has internally concluded that Elliott Associates, a U.S. hedge fund, violated the disclosure rule last year by failing to publicly declare that it possesses a stake in Samsung C&T exceeding 5 percent by "parking" Samsung C&T shares at international investment banks, and is considering sanctions. The current law bans a “parking” deal, which a stock owner temporarily deposits his security holdings in other’s accounts in order to hide them.
The FSS concluded that the U.S. fund involved in the sweetheart stock deal by buying shares in Samsung C&T from international investment banks at once when it increased its share in Samsung C&T from 4.95 percent to 7.12 percent, buying an additional 2.17 percent stake for a day, on June 3 last year.
It said that Elliot signed a total return swap contract with foreign brokerage houses to ask them to secure shares in Samsung C&T in advance, and receive them at once. TRS is a financial contract that an investor asks a contractor to buy underlying assets, including stocks, on behalf of the investor, and pays commissions. In this case, profits and losses belong to the investor.
The FSS think that Elliot had less than a 5 percent of stakes, which can prevent a public disclosure, and involved in parking deals using TRS in order to rapidly increase its shares in Samsung C&T at the optimal timing. Under the current stock ownership rule, an investor is obliged to issue a public disclosure within five days of acquiring a stake of 5 percent or more in a listed company. The FSS is planning to report and confirm the sanctions plan on Elliot to the capital market examination and review committee soon.