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[NEWS IN FOCUS] BioLogics ruling likely this month

May 07,2018
The country’s financial regulator may conclude whether Samsung BioLogics violated accounting rules by as early as the end of this month, as the first session to review allegations surrounding the biopharmaceutical arm of Samsung has been scheduled for May 17.

The result of the review will be handed over to the Securities and Futures Commission under the Financial Services Commission (FSC), the top financial regulator, which will make a final decision either on May 23 or June 7. Corrective and punitive measures may follow suit, including delisting the company’s shares on the Kospi, the worst-case scenario.

The Financial Supervisory Service (FSS), a financial watchdog, said on Sunday that Park Gweon-chu, chief executive auditor in charge of internal audit and compliance at the FSS, reported to Kim Yong-beom, vice chairman of the FSC, who also assumes the post as standing commissioner of the Securities and Futures Commission under the FSC, about the overall results of the special audit on Samsung BioLogics. Also present was Kim Hak-soo, standing commissioner of the Securities and Futures Commission.

The FSS tentatively concluded on May 1 that the Songdo, Incheon-based firm perpetuated an accounting fraud at the end of 2015 to bloat its value by converting the status of Samsung Bioepis, a biosimilar unit, from a subsidiary to an affiliate, thus facilitating its listing on the main Kospi.

The company and the media were notified of the conclusion. A day later, Samsung BioLogics denied any wrongdoing, going so far as to threaten to file an administrative suit against the FSS.

“There has been shock and confusion in the market after the fact that the [FSS’s] notification [about the result] had been sent to the company was made public,” said Kim Yong-beom to Kim Hak-soo. “Let’s hold the review session as soon as possible and please relay the result to the Securities and Futures Commission.”

It is unusual for the FSS to disclose the result of its audit to the public before discussing it with the FSC, insiders say.

Some speculate that the watchdog was under heavy pressure to come up with a tangible outcome related to its “financial reform” initiative after having two of its new governors replaced in the past year.

The FSC vice chairman went on to propose that the review session be “fair and transparent,” given there are a lot of parties with an interest in the matter and the impact of the issue on the credibility of Korean corporate accounting practice, both at home and abroad.

As fears of Samsung BioLogics’ being delisted from the main bourse spread, its shares nosedived for three consecutive trading sessions from May 2 to close at 359,500 won ($335.20) on Friday, shedding 26.3 percent.

“Sluggish performance of Samsung BioLogics is projected in the short-term,” said Lee Dal-mi, an analyst with SK Securities, “due to expanded uncertainties from the accounting scandal.”

But most brokerage houses think it is unlikely that the bio firm will lose its position on the Kospi, instead considering the recent fall in stock price a good opportunity for investors to buy. Korea Investment and Securities said on May 3 it would maintain the target price for the company at 610,000 won.


BY SEO JI-EUN [seo.jieun@joongang.co.kr]