Financial Services Commission Chairman Kim Seok-dong said it would not be easy to order U.S. Lone Star Funds to sell its stake in Korea Exchange Bank by directing “concrete” sale terms.

His remarks are based on the assumption that the financial regulator will decide to issue a sanction of coercive stake sale against the Texas-based buyout fund, suspected of stock manipulation.

“(Under the scenario of an enforced sale), the FSC is only entitled to set a deadline (for stake disposal),” Kim told reporters Monday.

He downplayed the speculation that the authorities could ban Lone Star from selling most of its shares to a particular investor such as Hana Financial Group which made a preliminary contract with the fund to trade KEB shares last November.

The chief regulator seems to share the view with Hana Financial chairman Kim Seung-yu, who has said, “I don’t think the FSC will be entitled to hand down the stake sale instruction by directing a concrete procedure though it may choose to order (enforced) sale.”

Their similar interpretations could be attributable to the nation’s banking laws which stipulate the sanction territory, which could be taken by financial regulators, against an ineligible shareholder of a commercial bank.

Local banking laws stipulate that the FSC could order ineligible shareholders ― non-financial investors or rule-violators ― to dispose of their stake in a Korean bank within a certain period ― a maximum of six months.

The laws do not ban a disqualified shareholder from selling shares to a particular investor, which may be regarded as a legal loophole.

An FSC official said regulatory staffers are anxious for a feasible scenario that Lone Star will hand over the KEB shares to Hana Financial despite its possible instruction for enforced sale.

“Only without being paid for premiums for management right of KEB (under terms on their preliminary contract), Lone Star may reap gains from selling the stake to Hana,” he said.

Chief regulator Kim also reiterated that several issues involving Lone Star will be dealt with according to the law.

Among the main issues are Lone Star’s eligibility as the biggest shareholder of KEB and the FSC’s approval or rejection to the provisional deal between the fund and Hana.

Though Hana had to obtain regulatory endorsement within five months (by May 24) to realize its initial contract with the fund, the FSC said earlier this month that it would indefinitely delay its ruling on the fund’s eligibility and its review on the proposed takeover deal.

The final result is expected to come after the court makes the final verdict on the fund’s executive-led alleged stock fraud.

By Kim Yon-se (kys@heraldcorp.com)