Shinhan Investment Corp. reported a loss of 130 billion won from transactions unrelated to its business, revealing that it has engaged in speculative transactions for three years.
On Nov. 4, the Financial Supervisory Service announced that a liquidity provider (LP) in charge of Shinhan Investment Corp.'s exchange-traded fund (ETF) could only trade derivatives for hedging purposes, yet since 2022, it has continued speculative futures transactions for the sake of bonuses.
The primary duty of the LP is to provide quotes for smooth ETF transactions for clients. In this process, it hedges itself against the risks of ETF price fluctuations through futures transactions. However, Shinhan Investment Corp. continued speculative futures transactions instead of hedging as an LP.
The Financial Supervisory Service pointed out that Shinhan Investment Corp. used trading revenue, which should not have been reflected in the performance of the ETF LP department, as one criterion for bonuses. It noted that the responsible executive encouraged the generation of trading revenue, leading to the firm promoting speculative futures transactions.
Eventually, on the 'Black Monday' of Aug. 5 last year, the Korea Composite Stock Price Index fell sharply, resulting in a loss of 130 billion won. The problematic department fabricated an illogical swap contract to cover up the loss by claiming a profit of 130 billion won within a single day.
The management accounting department was supposed to verify the monthly profit and loss data of each department but did not carry out this verification duty. Ultimately, employees in the ETF LP department wrongfully received hundreds of millions of won in bonuses.
In relation to this, in October last year, Kim Sang-tae, then president of Shinhan Investment Corp., stated through the company intranet, "As the CEO, I am truly sorry," adding, "I reflect on myself and feel a great sense of responsibility." Ultimately, Kim resigned at the end of last year.