FSC investigating China Development Financial Holding

The Financial Supervisory Commission said yesterday that it had started interviewing the management of China Development Financial Holding Corp (中華開發金控) as part of an investigation into alleged illegitimate transactions and flawed corporate governance.

"The process has begun. We might also work with judicial authorities to interview relevant people when required," Kong Jaw-sheng (龔照勝), chairman of the financial watchdog, told reporters on the sidelines of a question-and-answer session at the Legislative Yuan's Finance Committee meeting.

At the legislature, the commission released a two-page report on its initial investigation into the financial institution.

China Development Financial, the nation's 13th-biggest financial group by assets, is suspected of benefiting certain major shareholders who passed themselves off as foreign investors and reaped profits using insider information during the firm's hostile takeover attempt of smaller rival Taiwan International Securities Corp (金鼎證券).

Such actions would violate insider trading regulations.

"The commission has launched special investigations into China Development Financial and its two affiliates -- China Development Industrial Bank (中華開發工銀) and China Development Industrial Bank & Partners Investment Holding Corp (開發國際)," Kong said. "We'll refer our findings to the judicial authorities for further investigation as the commission does not have jurisdiction in these matters."

The commission began its investigations after the Chinese-language Business Today (今周刊) reported late last month that China Development Financial president Angelo Koo (辜仲瑩) bypassed the financial holding company's board of directors to use funds from the firm and its subsidiaries to invest in financially troubled China Life Insurance Co (中國人壽), which is owned by his family.

The media report criticized Koo for neglecting shareholder interests and corporate governance guidelines, as well as his controversial leadership.

In related news, China Development Financial yesterday said in a statement

that the firm and its affiliates had raised their combined holdings in

Taiwan International Securities to 39.88 percent. The company held a 32.1

percent stake in the brokerage house on March 1.

Shares of China Development Financial rose 0.4 percent to close at NT$12.85

on the Taiwan Stock Exchange, while Taiwan International shares were

unchanged at NT$12.45.