[DigitalToday reporter Oh Sang-yup] South Korea's Financial Supervisory Service has started on-site inspections of Shinhan Investment Corp and Kiwoom Securities to check whether there was mis-selling in the process of selling JTBC corporate bonds.

South Korea's financial authorities said on Wednesday the FSS completed a review related to the issuance and sale of JTBC corporate bonds and began on-site inspections of Shinhan Investment and Kiwoom from that day.

Shinhan Investment acted as the lead manager for the issuance of JTBC corporate bonds, and Kiwoom Securities is known to have sold asset-backed short-term electronic bills (ABSTB) to retail investors.

The financial investment industry said the bonds were distributed mainly through online channels. Kiwoom Securities, which has no offline branches, is estimated to have sold a substantial portion online.

The FSS plans to examine whether the two brokerages proceeded with the issuance and sale of the corporate bonds despite being aware of the risk of deterioration in JTBC's finances. It will also check whether they sufficiently notified investors of the risks and whether they provided guidance suited to investors' risk profiles.

Retail investors are reported to have filed complaints with the FSS, alleging the brokerages did not properly inform them of investment risks.

The FSS has been checking major brokerages for mis-selling since an affiliate of JoongAng Group applied to begin a rehabilitation process on June 15. It said it has not yet decided whether to expand inspections to other brokerages.

FSS Governor Lee Chan-jin (이찬진) said at a press briefing on June 22, in connection with the JoongAng Group default situation, that it had started checking whether the issuance of commercial paper or corporate bonds was appropriate. He said retail sales to individual investors appeared to have taken place until just before the default, and the circumstances would be inspected.