The Financial Supervisory Service (1)
The Financial Supervisory Service.
Just as its name suggested, it was the agency that oversaw banks, securities firms, insurance companies, fund houses, and every other kind of financial institution.
Ordinary people almost never had any reason to meet them. Financial companies, on the other hand, almost never wanted to meet them.
Seated in a café nearby, I looked down at the business card in my hand.
His name was Han Jongwon.
He was a department manager and part of the special investigative unit.
“What does the Financial Supervisory Service want with me?”
“First, could you confirm that Han Miru is the authorized representative of Continue Capital?”
I nodded.
“That’s right.”
Manager Han Jongwon continued, “I came because I have a few questions regarding Continue Capital’s purchase of Hanjeong Mulsan shares.”
I thought to myself.
Why had the Financial Supervisory Service suddenly shown up?
I had a rough idea.
Hanjeong Group had handed over ten billion won in bribes in exchange for the National Pension Service’s support. Since the merger had gone up in smoke, they needed someone to back them in the fight for control instead.
But the National Pension Service was tied up by suspicions of illicit influence-peddling.
So they’d moved the Financial Supervisory Service instead, hoping to probe around first?
They must have expected I’d side with them, since they’d already taken their cut. Even so, I hadn’t expected them to get this dirty about it.
“Well, if you put a coin in a vending machine, you should get coffee out. Otherwise the next person won’t bother putting in a coin.”
“What are you talking about?”
“Nothing. By the way, when did the Financial Supervisory Service get so diligent?”
“Monitoring and supervising financial institutions is our job.”
I laughed openly.
“Then was supervising Primus somebody else’s job?”
At my words, he frowned slightly.
When the Primus scandal broke, the Financial Supervisory Service took a severe beating for asking what it had been doing all along, and its chief, Jang Jinhaeng, bowed his head in apology.
For the record, I was the one who exposed that scandal.
So for him to stand there and hear that accusation directly from me—if he had even a shred of shame, he ought to be embarrassed.
“While private equity funds were fleecing the public out of trillions, you were all asleep. But the moment a chaebol group’s control rights are at stake, you move faster than anyone.”
“That’s a rather harsh way to put it.”
“I’m actually toning it down.”
If there had been a Primus Fund victim sitting here, they would have started with a string of obscenities. I hadn’t lost anything, so I could afford to sound calm.
“Get to the point.”
“I’d like to ask about a few suspicions.”
“What suspicions?”
“Continue Capital disclosed that it held 9.2 percent of Hanjeong Mulsan’s shares. You know that once a stake goes above 5 percent, you’re required to report it within five days, correct?”
“Of course.”
Anyone who had ever worked at a securities firm would know that.
Under disclosure rules, there was the so-called 5 percent rule.
If you held 5 percent or more of a listed company’s shares, or if your stake changed by more than 1 percent afterward, you had to disclose the change in ownership and your investment purpose within five days.
“But Continue Capital made its filing when the stake was already at 9.2 percent. How do you explain that?”
“Because until then, our holdings were at 4.7 percent. We bought another 4.5 percent through a block deal from another investment firm, which pushed us over 5 percent. That’s why we filed. Is there a problem?”
“Was there no TRS involved in the process of increasing the stake?”
TRS stood for Total Return Swap.
It was a type of derivative transaction in which a third party—not the actual investor—bought the shares, while the investor took responsibility only for the gains and losses.
“TRS isn’t illegal, is it?”
“Depending on the relationship with investors, the method of acquisition, and the purpose of the transaction, it could be considered a disguised acquisition of shares. That would clearly be an illegal investment practice intended to circumvent disclosure law.”
“Well, I suppose you could look at it that way.”
So was what I’d done illegal or not?
If I had handed Crown Prince Rashid 150 million dollars and asked him to buy the shares for me, then yes, that would have been illegal. But Rashid had bought the shares with his own money and transferred them to me.
I wasn’t the one bearing the losses or gains generated during the purchase of Hanjeong Mulsan shares, either.
In other words, all I had done was receive investment in the form of shares instead of cash, and it was hard to call that illegal.
…That was my view, at least.
In financial transactions, the line between illegal, legal, and loophole-based is razor-thin. Even courts often issue different rulings on nearly identical cases.
“You’re investigating Elliott under the same suspicion, aren’t you?”
The first time TRS had come up, it was because of Elliott Management. They had used the same method to avoid disclosure.
“Elliott is under investigation as well.”
That wasn’t a lie.
In my first life, the prosecutors indicted Elliott Management based on the Financial Supervisory Service’s investigation.
“Then what about the chaebols trying to pass control through loopholes, or the National Pension Service siding with them after taking bribes? Aren’t you investigating those?”
“If we determine there’s a problem, we’ll investigate.”
“The whole world’s media is already reporting that there’s a problem. Don’t tell me the Financial Supervisory Service doesn’t even watch the news?”
When I said that with a sneer, he didn’t bother hiding his irritation.
“Whether we investigate or not is for us to decide, not for Han Miru to comment on.”
“So what exactly does the Financial Supervisory Service do? Is protecting chaebol control rights what you’re paid for?”
Either way, I knew they weren’t going to investigate.
An organization that moved according to power would never dare touch a chaebol or a state institution.
“For now, I’d appreciate it if you answered my question regarding the suspicions.”
“Fine. I’ll answer you. There was nothing illegal whatsoever, so you can relax and go home.”
He looked genuinely stunned by my answer.
“You expect me to believe that?”
“Why not? The foundation of finance is trust, isn’t it? We have to believe in each other.”
“Then surely you can do at least this much for trust.”
Manager Han Jongwon took a document envelope from his bag and held it out toward me.
“What is it?”
“A request for document submission.”
I opened the envelope, pulled out the papers inside, and skimmed through them.
The ownership structure of the investment vehicle, the source of funds, the process of recruiting investors, the TRS arrangements, and so on.
In short, they wanted me to compile and submit every detail from the firm’s founding to the present.
“That’s quite a lot. Why do you need all of this?”
“These are all necessary documents, so please submit them.”
I put the papers back into the envelope and slid it back across the table.
“What are you doing?”
“Take them back.”
At my words, Han Jongwon asked in a sharp voice, “Are you refusing the request for submission?”
“Yes. It’s a request for submission. A request. Unless I’m misunderstanding the word, a request can be refused, can’t it? The Financial Supervisory Service made a request, and I declined. What’s wrong with that?”
His voice rose. “Are you trying to be clever now?”
“Would you prefer I call it coercion or an order instead of a request?”
“And if it were?”
“Then bring a proper warrant. Don’t shove documents in my face and try to bully me.”
Apparently this wasn’t the response he had expected, because he scowled.
A regulator’s request for documents was practically an order in all but name.
This was probably the first time something like this had happened to him. Usually, when the Financial Supervisory Service spoke, people at least pretended to comply.
He had probably planned to start with an excessive demand and then narrow the scope later. But I had no intention of letting him drag me around by the nose.
Looking at me, Han Jongwon said, “Since you worked in securities, you know very well that there’s nothing good about making the Financial Supervisory Service your enemy.”
For financial companies, the Financial Supervisory Service was no different from the grim reaper.
Even a simple investigation could throw the whole company into chaos.
Whether they had a real case or not, they had no shortage of ways to make life miserable. They could use trivial pretexts to suspend operations or even strip a firm of its license entirely.
But Continue Capital was a U.S. corporation.
It wasn’t raising funds domestically, and it wasn’t conducting business here either. There was no need for us to tread carefully for appearance’s sake.
From the beginning, the fact that they had come looking for me at all meant they didn’t really have anything to grab hold of.
I threw his own words back at him.
“Since you work at the Financial Supervisory Service, you know very well that there’s nothing good about making an overseas investment firm your enemy.”
“What did you say?”
“If this gets out to the press, what do you think foreign investors will make of it? Won’t they assume that South Korea drags in investigative agencies whenever a chaebol group’s control rights are threatened?”
“That’s not—”
“If investors sue the Korean government over this, does the Financial Supervisory Service have the confidence to deal with the fallout?”
The reason I could sound so confident was simple.
First, the fact that the Financial Supervisory Service had moved like this was itself a reckless overreach.
Second, half of Continue Capital’s investment capital came from Crown Prince Rashid. And the princess was helping too.
If he had known that, he never would have come to see me in the first place.
He frowned and shut his mouth.
Without knowing who Continue Capital’s investors were, he couldn’t just move carelessly.
“South Korea is not some soft target where speculative capital can run wild.”
“And Continue Capital is not some soft target the Financial Supervisory Service can run wild over.”
“What did you say?”
“It’s the truth, isn’t it? Elliott has been around for a long time, so it’s not easy to go after them. One misstep, and you could set off a chain reaction with other private equity firms, or even see foreign capital start pulling out. If it becomes public, it’s an international embarrassment. You could get sued, too. So in the end, you came after the easy target—you came after me.”
“Listen here—”
“If you truly think there’s no problem, why don’t I tell the press that the Financial Supervisory Service made this demand? Domestic outlets might stay quiet, but foreign media would be all over it.”
“……”
Han Jongwon went silent.
Of course, I had no intention of actually doing that.
Even if TRS itself was legal, it was still a loophole. And if the stakes got any bigger, the Financial Supervisory Service would have no choice but to come at it with everything they had.
I tapped the documents with my finger.
“If you’ve got time for this kind of pointless nonsense, you should be investigating financial fraud properly.”
“What? Pointless nonsense? Watch your language—”
I cut him off and kept going.
“Primus, Cobalt Gate—what kind of country has a financial scam blowing up every time people start to forget the last one? And when one does explode, we’re talking trillions of won like it’s nothing. Isn’t that happening because the Financial Supervisory Service isn’t doing its job properly?”
Han Jongwon’s face went red.
“Are you finished?”
I went on without caring. “No, I’m not. If the Financial Supervisory Service had been doing its supervisory work properly in the first place, would any of that have happened? What exactly do your employees do while collecting a salary? Is this what the public pays taxes for? Go tell them that if they don’t want to be called loafers, they’d better start doing their jobs.”
“W-what? Loafers? Hey, Han Miru!”
His thick cheeks twitched with rage.
He probably hadn’t expected to come here for an investigation only to be lectured by someone as young as I was. Judging by his expression, he looked ready to swear at me on the spot, but he was holding back for the sake of his dignity.
“If you don’t have anything else to say, I’ll be going now.”
He warned me, “You’ll regret this.”
I snorted.
“As if. I don’t do regret.”
---