There are signals from Korea that the government and regulators are taking an increasingly tough line with foreign participants in the local markets.
Since December last year, Korea's main financial regulator, the Financial Supervisory Service, has been investigating UK pension fund and corporate governance proponent Hermes Investment Management for alleged illegal trading in the shares of Samsung Corp. In July, the FSS referred its investigation to the public prosecutor's office.
Hermes had remained tight-lipped hitherto but, on hearing the news from market sources rather than the FSS itself, issued a terse statement denying all the allegations and expressing itself to be "very disappointed by the result of the investigation" and "extremely upset to have learned of this reference from its own sources in Korea, despite having requested the Korean financial authorities... to provide notice to Hermes prior to the public release of any such information."
The move follows FSS investigations into the activities of foreign brokers in trading derivatives. The FSS claims that four foreign banks, including BNP Paribas and Deutsche Bank, all sold complex derivative instruments to Korean clients without adequately explaining the risks involved. The FSS appears increasingly to be conducting its campaigns through the press.