Macquarie censured for malpractice in Korea

The South Korean unit of Australia-based asset manager Macquarie Funds Group faces a three-month business suspension and was fined 100 million won ($91,000) for business malpractice linked to bond trading, the country’s financial watchdog said Friday.

According to the Financial Supervisory Service, Macquarie Investment Management Korea has been involved in the business malpractice of “parking” bonds at brokerages for a certain period, not immediately recording bond purchases on the balance sheets of funds under management.

The business practice has been rampant here as fund managers can buy bonds in advance exceeding the limit through verbal agreements with brokerages and artificially manipulate their funds’ returns.

When bond prices are on the rise, both asset managers and brokerages can rake in profits, but brokerages face the risk of suffering losses as bond yields move inversely to price rises.

The financial watchdog also took punitive measures against Shinyoung Securities, Kiwoom Securities and two other brokerages for their involvement in the malpractice, and censured employees at Hyundai Securities and HMC Investment & Securities.

The Financial Services Commission, the country’s financial regulator, will finalize the punishment later. (Yonhap)