Far Eastern International Bank fined $340,7571 million in Taiwan
Far Eastern racked up the violations through its involvement in convertible bond asset swap (CBAS) transactions, as it sold the derivative instrument to company insiders, including board directors and supervisors and managers, as well as their spouses, the commission said, adding that the practice is in violation of internal controls for banks.
The result is that the call option can be retained by investors seeking gains from stock price movements, while the bond component can be sold to investors looking for fixed incomes.
Concord Securities was also penalized for its involvement in XPEC’s CBAS deal, and was barred from offering book building services as well as applying for new businesses and branches for three months, while two of the brokerage’s employees were suspended from related duties.
“XPEC chairman Aaron Hsu had instructed Concord Securities to work with Far Eastern to put two rounds of convertible bonds through the CBAS process and the brokerage would provide a list of clients to facilitate the deal,” Securities and Futures Bureau Deputy Director-General Chou Hui-mei told a news conference.
Far Eastern Bank meddled with between 2,450 and 2,800 units of XPEC convertible bonds in two rounds of 5,000-unit issues, the commission added.
In addition, the bank was found to have sold some convertible bonds before they had acquired a sufficient amount in their holding, which was against risk control guidelines, the commission said.
The fines levied on the bank also include a NT$1 million penalty for unauthorized investment in an offshore private equity fund, the commission said.
Far Eastern Bank is the nation’s No. 1 bank in CBAS transactions with a 90 percent market share, the commission said, adding that it has completed 18,000 CBAS deals in the past two years.
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