KEB union files injunction with Constitutional Court to ban regulator’s action
Unionized workers of Korea Exchange Bank, owned by Lone Star, filed an injunction with the Constitutional Court on Tuesday to ban the Financial Services Commission from ordering the U.S.-based fund to dispose of its KEB shares without probing the fund’s shareholder eligibility.
If the Constitutional Court accepts the request from the KEB union, the FSC cannot instruct Lone Star to do so for the time being.
The financial regulator had not taken issue with Lone Star’s bank shareholder eligibility despite a series of allegations that the fund is a non-financial investor, and thus barred from controlling a Korean bank.
Irrespective of shareholder eligibility, the FSC had allegedly planned to “simply” order Lone Star, which was convicted of stock manipulation on Oct. 6, to sell most of its stake in KEB to any investor ― Hana Financial Group, for example.
But with the legal action of the KEB union, the regulator has no choice but to postpone its decision-making and take a wait-and-see attitude.
If the Constitutional Court rejects the injunction, the FSC is allowed to push for its earlier plan.
Should the court accept the injunction, the regulator could face a bumpy road and be pressured to make public the result of its probe into Lone Star’s shareholder eligibility.
Though a group of lawmakers and civic groups publicized the documents verifying the fact that Lone Star has been ineligible to own a commercial bank, the FSC has yet to clarify its stance on the issue.
The issue could bring about a great stir in the market. On the assumption that Lone Star has been a non-financial investor, its takeover of KEB in 2003 could originally be invalidated or its preliminary deal with Hana Financial Group to trade KEB shares in 2010 could also be nullified.
“It is true that the issue of Lone Star’s shareholder eligibility has also been a target of our consideration,” an FSC official said.
Aside from the injunction from the union, the Constitutional Court embarked its review on whether the FSC neglected its duty to probe the shareholder eligibility of Lone Star, accepting a petition from a group of small shareholders in late October.
The prosecution is also investigating the 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.
Meanwhile, Lone Star reportedly asked the FSC to provide the fund with a maximum of six months as a period for its stake disposal, according to an online news provider.
But FSC officials declined to comment on the fund’s alleged proposal.
By Kim Yon-se (email@example.com