On April 5th, a Samsung Securities employee made the mistake of typing 2.8 billion “shares” for stock dividends instead of 2.8 billion “won,” resulting in the circulation of 112 trillion won worth of unauthorized stocks.
Details of the Incident
|Samsung Securities/ biz.newdaily.co.kr|
Friday, April 6th, was a day when Samsung Securities deposited stock dividends to its stockholders. Samsung Securities, a Korean financial investment and wealth management company, regularly makes transactions to its stockholders based on their portions. The stock dividends are normally granted in the form of Korean currency, but one employee selected the wrong category and inputted 1,000 “shares” per person instead of 1,000 “won” on April 5th. This mistake was not corrected by any other employee even until the approval step, and the deposits were made the day after.
Considering that the stock price of Samsung Securities was \39,800 on April 6th, what should have been \1,000 per person became \39.8 million per person. This input mistake resulted in 2.8 billion shares per person in total, which totaled up to \112 trillion worth of unauthorized shares circulating on the stock market. The data processing team of Samsung Securities discovered what had happened on the morning of April 6th, but 16 employees had already sold 500 million shares. Consequently, the stock price of Samsung Securities fell 11% on that day.
This incident had a huge impact on public opinion after it was reported on, and Korea’s Financial Supervisory Service started their investigation on domestic security corporations; the investigation on Samsung Securities began on April 11th and ended on April 27th.
Controversy Surrounding Compensations
Samsung Securities first offered an apology to the individual investors along with guidelines that they could receive compensation. Stockholders who sold shares purchased before April 6th would be compensated according to the stock price drop. As of April 13th, among 361 individual investors who reported their losses, Samsung Securities reported that 40 people were given subsidies.
Compensations for corporations and groups, however, were not taken into account. In particular, Korea’s National Pension Service (NPS) took a considerable loss due to the stock price drop. Being a major shareholder of Samsung Securities, the NPS claimed that they lost nearly \350 million. There are perspectives that Samsung Securities does not have to compensate groups, since investors hold the responsibility of the fluctuation of stock prices; however, much of the public opinion deemed the NPS to be an exceptional case.
The NPS collects a portion of every Korean citizen’s salary and distributes the money to the aged and retired. Samsung has a history of being convicted of bribing the government and pressuring the NPS to merge with one of its affiliates. Korean citizens showed their frustrations toward the money, which should have been used for the national welfare service. The NPS mentioned that they will go to court in the case that Samsung Securities does not compensate for their recent losses.
Unanswered Questions and Suspicions
|Public Protest on Samsung Securities’ Accident/ consumernews.co.kr|
One major question raised by the public was “how the system allowed Samsung Securities to issue 2.8 billion shares in the first place,” because they are capable of issuing only 100 million s h a r e s i n l e g a l terms. Moreover, they should have been able to have dealings with only 89 million shares. This incident, therefore, proved that legal conditions were not taken into account when issuing shares worth 30 times more than the market value of Samsung Securities. Whether this incident was a one-time incident, or the revelation of a long-continued method of market manipulation; individual investors’ suspicions are growing. Public protests were held in front of the Financial Supervisory Service on April 20th and 21st, asserting that Samsung Securities be prohibited to conduct business, and every securities company in Korea be investigated on whether past exploitation has taken place.
<저작권자 © THE SUNGKYUN TIMES, 무단 전재 및 재배포 금지>