Four fund managers involved in the handling of four government funds may have engaged in illegal trading activity, Financial Supervisory Commission (FSC) Chairman Chen Yuh-chang (陳裕璋) said at a meeting of the legislature’s Finance Committee yesterday.
Chen added that the commission plans to complete its financial scrutiny of all securities investment trust companies handling the four government funds within a month.
The four government funds are the Civil Servants Pension Fund, the Postal Savings Fund, the Labor Insurance Fund and the Labor Pension Fund.
The latest discovery was part of the commission’s investigation into abnormal stock transactions by the securities investment trust firms. The probe was launched after a report by the Chinese-language Business Today (今周刊) earlier this month alleging that former ING Securities Investment and Trust Co (ING SITC, 安泰投信) vice president Sam Hsieh (謝青良) and his peers, using the government’s Labor Insurance Fund and Labor Pension Fund, made huge profits from manipulating the stock of Ablerex Electronics Co (盈正豫順電子) via dummy accounts.
The government-owned funds incurred more than NT$100 million (US$3.4 million) in losses in 2010 after Ablerex stock nose-dived later, Council of Labor Affairs Minister Pan Shih-wei (潘世偉) said earlier this month.
Chen said the commission had finished its preliminary investigation of 38 securities investment trust companies and found four fund managers in four different firms contracted to manage government funds had “abnormal stock holdings” either themselves or by their families.
“None of the four cases are related to the Ablerex investment,” Chen said in a question-and-answer session at the committee.
He refused to name the four companies.
The commission has asked the four firms to submit a thorough explanation of the four fund managers’ behavior within 15 working days.
Asked what the commission would do after three or four fund managers reportedly resigned after the commission announced its plan to launch an investigation earlier this month, Huang Tien-mu (黃天牧), director-general of the commission’s Securities and Futures Bureau, said on the sidelines of the legislative session: “We will further clarify why they resigned.”
In its latest report, Business Today said that more alleged rogue traders like Hsieh in other securities investment trust firms were contracted to manage government funds.
The weekly said that two former fund managers, Peng Kuo-hsing (彭國星) of KGI Securities Investment Trust Co Ltd (凱基投信) and Chen Bo-yu (陳伯俞) of First Securities Inc (第一金證券), were also involved in the Ablerex case.
As First Securities Inc is a subsidiary of state-run First Financial Holding Co (第一金控), the magazine said the government should strengthen internal oversight and self-discipline to minimize malpractices.
Chen Yuh-chang, who had served as chairman of First Financial before assuming his current post as FSC chairman in 2010, said he did not know about the allegations against Chen Bo-yu because he had already left First Financial when the latter started trading Ablerex shares.
Meanwhile, the Ministry of Finance is considering new measures to monitor and operate government funds.
Minister of Finance Chang Sheng-ford (張盛和) said the government may establish a special agency in charge of the operation of the four government funds or place their operation under a single government agency.
However, the commission did not support the idea of abolishing the practice of outsourcing management of government funds, saying it is a business model used by many major countries.