Samsung Securities’ proposal for a short-term funding business (issuer commercial paper) licence failed to be placed on the agenda of the Financial Services Commission’s regular meeting on Tuesday, making the timeline uncertain again. This means Samsung Securities’ move into the issuer commercial paper business has again slowed at the final hurdle.

According to the financial investment industry, the prevailing view in the market had been that Samsung Securities could join as South Korea’s eighth issuer commercial paper operator if it cleared this meeting.

After deliberations by the Securities and Futures Commission on April 8, some had raised the possibility it would pass the FSC’s regular meeting on Tuesday. Others also said that once FSC deliberations were completed, the basis for launching the business could be put in place within this month.

The latest failure to put the item on the agenda is drawing attention because the issuer commercial paper licensing process has so far shown a relatively predictable pattern.

In many cases, after an item was placed on the SFC agenda, a decision was often settled at the following week’s FSC regular meeting. The fact that the review result was not a rejection, but that the item itself did not come up, has made market interpretations more complicated.

Samsung Securities already secured in 2017 the status of a comprehensive financial investment business operator with equity capital of at least 4 trillion won, a requirement for an issuer commercial paper licence. It has not received the licence so far due to issues including internal controls.

In July last year, it applied for a short-term funding business licence along with Kiwoom Securities, Hana Securities, Shinhan Investment and Meritz Securities. Kiwoom Securities, Hana Securities and Shinhan Investment then received approvals in sequence.

Samsung Securities had been seen as facing what was effectively the last gateway in follow-up procedures, making the setback heavier.

Issuer commercial paper is a short-term funding business in which a comprehensive financial investment business operator with equity capital of at least 4 trillion won raises funds by issuing notes with maturities of up to 1 year on its own credit.

An operator can issue notes up to 200 percent of its equity capital, and the funds raised can be used for corporate finance, investment finance and unlisted investments.

Seven securities firms currently hold licences for the issuer commercial paper business: Korea Investment & Securities, Mirae Asset Securities, NH Investment & Securities, KB Securities, Kiwoom Securities, Hana Securities and Shinhan Investment.

From a policy perspective, the decision also leaves a significant gap. Financial authorities have described the issuer commercial paper system as a way to expand securities firms’ funding functions and a channel to increase corporate finance and venture capital supply.

In particular, firms must invest more than 50 percent of funds raised through issuer commercial paper in corporate finance-related assets. From this year, a 10 percent mandatory supply ratio for venture capital applies, giving the expansion of new operators a meaning beyond a simple licence issuance.

As a result, some in the industry are also saying the failure to put it on the agenda shows a gap between the policy direction and how reviews are actually run.

Expectations that Samsung Securities’ approval was imminent were already widespread in the market. Some pointed to the fact that only Samsung Securities, excluding Meritz Securities, was placed on the SFC agenda and saw a high likelihood of an FSC approval.

Some in the industry are again raising concerns about fairness. There have been persistent comments that authorities are taking an unusually conservative approach toward Samsung Securities compared with other securities firms as its review drags on, and that the latest setback has reignited such claims.

However, financial authorities have not officially explained any need for additional supplementation or reasons for holding the review, making it difficult at this stage to be definitive about the exact background to the delay.

An industry official said the Financial Supervisory Service found unsound sales practices during inspections of Samsung Securities’ key branch offices last year. The official said the FSC may have approached its final decision cautiously given that compliance and internal controls are considered important in issuer commercial paper licence reviews. The official added that even if related sanctions were settled at the level of a light disciplinary action last month, the fact that related procedures have not fully ended could also be a variable.

The official added that even if authorities view licensing and sanctions separately, they cannot avoid considering them together in an actual judgment, which could have pushed the timing of a decision back further.