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KB Securities Employee Embezzles Customers' Money Deposited into Dormant Accounts
Further Losing Credibility with Customers
KB Securities Employee Embezzles Customers' Money Deposited into Dormant Accounts
  • By Yoon Young-sil
  • November 12, 2018, 17:21
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KB Securities' two co-CEOs, Yoon Kyung-eun (left) and Jun Byung-Jo

KB Securities Co. has recently discovered during an inspection of its internal control system that a company employee embezzled money deposited into customers’ dormant accounts.

The employee was found to have embezzled as much as 300 million won from 25 dormant accounts since April this year. KB voluntarily reported the case to the Financial Supervisory Service.

In response, the FSS will investigate KB Securities and the employee and impose sanctions.

Due to this incident, it has become uncertain whether KB would be allowed to enter new business areas. According to the Capital Market Act, a securities company is not allowed to move into new sectors for a certain period of time depending on the degree of the sanctions imposed on it for its malpractices.

A bigger problem for KB Securities is that it has been losing credibility due to an unending series of sanctions from regulators. According to industry tracker CEO Score, KB Securities has been penalized by regulators 18

 

times during the period from 2015 to the first half of 2018, the largest number among the 56 Korean banks, insurance companies, brokerage houses and credit card firms.

The regulators included the Financial Supervisory Service, the Financial Services Commission, the Fair Trade Commission and the Korea Exchange.

KB Securities paid a total of 6.3 billion won ($5.7 million) in fines for the disciplinary actions.

KB Securities is said to have been punished this year alone for violating the ban on extending credit to major shareholders, failing to provide information on the current state of retirement pensions to their subscribers, violating the obligation of pension fund operators, and failing to report its programs in advance.

The brokerage’s credibility was further undermined by its poor performance in terms of the accuracy of stock price forecasts. Last year, it ranked 13th out of the 14 domestic securities companies that predicted stock prices.

KB Securities is one of the largest investment banks in Korea with $4 billion in capital, $100 billion in investor asset, and 3.8 million of investors. It was created through the merger between KB Investment & Securities and Hyundai Securities.

"It is true that KB Securities has not been living up the expectations," a senior securities industry official said.

Another analyst said KB Securities Co. has tended to focus on advancing into new business areas to expand its size, ignoring the importance of strengthening trust with customers.