Ruling fails to cast out doubt on Hana-KEB merger

FSC is probed on whether it neglected the duty of probing Lone Star’s shareholder eligibility.

Hana Financial Group continues to face a hurdle in its plan to acquire Korea Exchange Bank from Lone Star Funds despite a court’s ruling that the U.S.-based equity fund engaged in stock manipulation.

Over the past month, the Financial Services Commission has been in the preliminary stages of ordering Lone Star to sell a large portion of its stake in KEB following the court’s verdict on Oct. 6, which may pave the way for Hana Financial to take over the bank.

But action at the current stage could draw serious problems in terms of criminal responsibility as the prosecution has been investigating the FSC on whether it neglected the duty of probing Lone Star’s shareholder eligibility.

The prosecution’s investigation also involves allegations that Lone Star hindered the FSC from legitimately probing its eligibility by not reporting documents verifying the fact that the fund was a non-financial investor in 2003.

In addition, the Constitutional Court, which decided to accept the petition from a group of small shareholders of KEB, has instructed the regulator to submit related documents for Lone Star’s eligibility.

The small investors argue that “the FSC did not take punitive measures against Lone Star though the fund has been found to be a non-financial investor (at least) since 2005.”

View the full story in Korea Herald.