Regulator could order sale at extra panel meeting


The Financial Services Commission has decided to speed up procedures to order Lone Star Funds, convicted of stock manipulation, to sell a large portion of its stake in Korea Exchange Bank.

The financial regulator is likely to order the U.S. buyout fund to dispose of 41.02 percent out of its 51.02 percent stake in KEB in early or mid-November.

“We have the position that we could order the stake sale by holding an extra meeting of FSC panels, if necessary, (while ordinary panel discussions are held twice a month),” an FSC official said.

As a prior notification, the regulator on Monday instructed Lone Star to satisfy eligibility as the majority shareholder of a Korean commercial bank.

The fund may raise objections to the coming regulatory policy between Oct. 18 and Oct. 24.

After Oct. 24, the FSC plans to hand down the instructions to meet shareholder eligibility by holding a ― extra or ordinary ― meeting of FSC panels.

Regulatory officials said the process is merely a technical procedure as Lone Star decided not to appeal the court’s guilty verdict of rigging stocks of KEB’s credit card affiliate in 2003.

“As its fulfillment is expected to be practically impossible (from the court’s ruling), we are moving to minimize the procedure (by giving Lone Star short period),” the FSC said in a statement.

As the next step, the regulator plans to make another prior notification to Lone Star that it would order the stake sale under the assumption of the fund’s failing to satisfy the shareholder eligibility.

After the prior notice of about a week, the FSC is scheduled to finally order the stake sale through the panel discussion.

Meanwhile, FSC officials declined to comment on whether the regulator will “simply” order a stake sale, which will be linked to the feasibility that Lone Star may choose to hand over the dominant stake to Hana Financial Group.

The two parties signed a preliminary deal to trade KEB shares in November 2010.

At the current stage, the FSC cannot mention whether it will instruct the fund to dispose of shares on the stock market to anonymous investors at market-determined prices, an FSC official said.

Under the scenario, Hana Financial could possibly fail to take over the bank.

A Korean bank’s biggest shareholder which violates the nation’s banking laws would be disqualified from owning the lender, being barred from holding more than a 10 percent stake.

The regulator’s stance comes last Thursday after Lone Star expressed its position not to appeal to the Supreme Court for the Seoul High Court’s Oct. 6 verdict.

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