What caused the massive 'fat-finger' mistake?: Korea Herald columnist

Won Seung Yeon, deputy head of South Korea's Financial Supervisory Service, announces plans to conduct a special probe into Samsung Securities over a massive dividend payment error in Seoul on April 9, 2018.
Won Seung Yeon, deputy head of South Korea's Financial Supervisory Service, announces plans to conduct a special probe into Samsung Securities over a massive dividend payment error in Seoul on April 9, 2018.PHOTO: EPA-EFE

In her commentary, the writer calls for corrections to monitoring systems to prevent scandals, such as the latest one involving Samsung Securities, from happening.

SEOUL (THE KOREA HERALD/ASIA NEWS NETWORK) - The latest rumour in the mill that is corporate Korea is that the employee who recently made the fatal mistake of entering the wrong order for Samsung Securities, in what has become a multibillion-won loss case, is on the brink of suicide.

It's hard not to feel sorry for whoever the person is, given how devastating it must be to see just how much damage he or she has caused. Samsung is doing all it can to prevent his or her identity from slipping through the highly wired cracks of Korea, but it seems, eventually, there could be a leak.

At the same time, things are very much the fault of this employee. In the world of finance, every single decision has to do with money - more often than not, other people's money.

However, while it's easy to place blame, that shouldn't really be the case where the system and a lack of control systems were the real problem. It's also not an issue of whether short-selling - the naked kind - should be eliminated.

It's an issue of just how much local financial companies were bending the rules and just how riddled with loopholes the system was (that has led to what is being billed as the 'fat-finger' trading chaos).

One industry watcher close to the matter said that the problem was just waiting to happen, given how brokerages are operated.

"It's not because they were okay with the loopholes. It's just that they are used to doing things this way, and also because nobody really expected the system to fail as hard as it did," she said. "Everyone's ready for the big failures and mistakes, but nobody thought an employee could make a mistake on her order key."

Samsung Securities is one of Korea's five largest brokerages. As an affiliate with Samsung, it had its share of both advantages and disadvantages. As a member of the "Samsung Family," when other brokerage stock prices ran downhill, it stood steadfast.

One big reason is because it had some strong supporters on its side, such as the National Pension Service - the world's third-largest such fund managing money to be used to finance the pensions of Koreans.

But this situation may change quickly, since as of March 30, the brokerage shares that NPS had fallen more than 40 billion won (S$49.2 million) in value.

The NPS has now decided to fire Samsung Securities from its asset management, and the local pension fund is not the only one. More companies have stood up to say "no" to Samsung Securities, and this will have a huge toll on the brokerage's margins.

The price of having no internal control systems, and not being stringent enough on employees' sense of ethics, is wreaking much havoc now on one of the biggest brokerage houses in Korea.

In an undisclosed interview with an employee who attempted to sell his ghost stocks, he said he didn't expect to get caught because he thought the issue was limited to his account. If he kept quiet about it, he thought nobody would know.

He said he realised just how terribly wrong he was the minute he saw stock prices starting to fall. Many others - likely operating under the same illusion - were offloading stocks.

Again, while these folks shouldn't be let off the hook, to err is human. They will have to accept whatever legal fates are dealt to them, but this incident should not be just something that ruined the lives of a group of hapless investors.

It should be a lesson to keep honing and perfecting the system to make it as invincible to human errors as possible.

The writer is managing editor of the paper's The Investor publication. The Korea Herald is a member of The Straits Times media partner Asia News Network, an alliance of 23 news media entities.