Thu, Jul 19, 2018 - Page 12 News List

Nan Shan faces penalties over lax internal controls

By Ted Chen  /  Staff reporter

The Financial Supervisory Commission (FSC) is mulling stiff penalties for Nan Shan Life Insurance Co (南山人壽) for lax internal controls after one of the company’s portfolio managers was accused of misconduct.

One of the life insurer’s portfolio managers, who was overseeing a NT$13.5 billion (US$441.44 million) portfolio of Taiwanese stocks, was suspected of using the company’s buying power to manipulate stock prices, the commission told a news conference on Tuesday.

The manager, surnamed Yeh (葉), also ran a business on the side, offering investment advice to about 200 people, the commission said.

Yeh is accused of tipping his customers off about his portfolio moves via two chat groups on the Line messaging app, the commission said.

He breached conflict-of-interest rules, as well as internal control protocols that prohibit securities traders and fund managers from using their smartphones during trading hours, the commission said.

Yeh chose to invest in stocks with smaller capitalization, as they were easier to manipulate, it added.

As Yeh was a manager and did not personally execute any trades, Nan Shan did not require him to hand over his smartphone, Insurance Bureau Chief Secretary Lin Yao-tung (林耀東) said, adding that Yeh was not cleared to view the insurers’ entire investment portfolio.

While an external whistleblower reported Yeh’s misconduct to the insurer as far back as May, Nan Shan did not report its findings to the commission until Monday, Lin said.

The insurer only reported the matter to the commission just before a tell-all report by the Chinese-language weekly magazine Mirror Media was about to be published.

Due to its failure to report the issue in a timely manner, the insurer could be facing a fine of NT$12 million for internal control lapses, and the commission reserves the right to suspend or terminate members of the company’s board of directors and supervisors, Lin said.

Mirror Media said that Yeh had invested in Viking Tech Corp (光頡科技), a manufacturer of high-precision resistors and radio frequency inductors with a market capitalization of NT$1.17 billion.

Most life insurers do not invest in or track companies with market capitalization below NT$20 billion, the magazine said.

Yeh’s actions could have caused a spike in Viking Tech shares, which had shot from NT$40 at the end of May 21 to an intraday high of NT$81.9 on June 12, Mirror Media said.

The stock dropped by the maximum 10 percent daily limit to NT$55.4 in Taipei trading yesterday.

The commission has not ruled out an additional financial probe into Nan Shan, Lin said.

Nan Shan yesterday said in a statement that Yeh has resigned from the company and the case has been turned over to prosecutors following an internal investigation.

The insurer said that each of its investment decisions require the approval of its independently run investment department, and that its corporate policy prohibits all forms of stock price manipulation.

The insurer denied that Yeh was communicating with his own customers.

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