**FSS Issues Preliminary Notice of Severe Disciplinary Action to MBK Partners Regarding Homeplus Incident**
On the 23rd, it was reported by financial authorities and industry sources that the Financial Supervisory Service (FSS) notified MBK Partners of its disciplinary proposal, which includes job suspension, on the 21st. This is the first time that severe disciplinary action is being pursued against a General Partner (GP) of an institutional Private Equity Fund (PEF).
Such sanctions, if finalized following a sanctions committee and a resolution by the Financial Services Commission, could lead to restrictions on new business. According to the Capital Markets Act, once a severe disciplinary action such as job suspension is confirmed, it would cause disqualification in major shareholder eligibility reviews, which would block the establishment of new funds and entry into new businesses for the next few years. This is why in the industry, severe disciplinary actions, especially job suspension or higher against a GP, are effectively seen as equivalent to a business suspension.
Recently, the FSS investigated MBK to determine whether it altered the redemption conditions of homeplus’s Redeemable Convertible Preferred Shares (RCPS) to favor Homeplus during a credit rating downgrade, potentially harming the interests of investors such as the National Pension Service, which invested 582.6 billion KRW. During this process, allegations of unsound business practices and violations of internal control obligations were reportedly discovered.
If severe disciplinary action is confirmed, the reaction of the National Pension Service, a major market player, will also be of high interest. The management standards for entrusted operators of the National Pension Service stipulate that an asset management firm can be disqualified if it receives a warning of institutional level or higher due to legal violations. MBK Partners stated, “The change in the redemption conditions of Homeplus’s preferred shares was to prevent a sudden credit rating drop and to maintain Homeplus’s corporate value. It was a natural duty of the GP to protect the interests of all investors and a management decision,” adding that they will sincerely explain during future procedures like the sanctions committee.