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S.Korea prosecutors reviewing Deutsche Bank units - report
Reuters - Wednesday, February 9
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SEOUL, Feb 9 - South Korean prosecutors have started an internal review over whether Deutsche Bank AG units have been involved in market manipulation and irregular transactions, local media reported on Wednesday.
The move comes as financial regulators are set to decide as early as Thursday whether to penalise the German bank's local brokerage unit and Hong Kong operation over potential irregular trades that may be linked to a near 3 percent plunge in the stock market at the close of trading on Nov. 11.
Prosecutors have started internally reviewing the case before a formal investigation request by financial regulators, due to the significance of the issue, which involves potential market manipulation, the Dong-a Ilbo daily quoted an unnamed source at the prosecutor's office as saying.
Prosecutors were not immediately available for comment and Deutsche Bank declined to comment.
Financial regulators said they had yet to decide whether to take the case to prosecutors.
Record foreign selling on Nov. 11, including a 2.3 trillion won sale from Deutsche accounts before the market closed led to a 53-point drop in the KOSPI amid options expiry.
Media reports said Deutsche Bank had garnered profits of about 40-50 billion won from put-option transactions just before the massive stock sell-off, which caused the market to plunge and made their option contracts profitable.
"Deutsche did make option transactions an hour before they made massive sell orders and that has led to believe it may have been involved in irregular transactions," a regulatory source told Reuters, declining to be identified because the source was not authorised to talk to the media.
"Deutsche is denying the allegations and the issue may eventually go to court for a final verdict."
On Monday, the Financial Services Commission said the authorities had yet to decide on follow-up measures regarding the probe.
Massive foreign selling on the day propelled overall market turnover to its highest in 18 months. A single trade in the final minute of trading made up about 14 percent of total KOSPI volume for the day, according to the Thomson Reuters trade log of exchange data.
That single transaction caused the index to drop 2.4 percent.
" are making final checks on the case and it may be put on the table as early as Thursday at the (regular bi-weekly) committee meeting that deliberates capital market investigations," another source close to the matter told Reuters.
If the case is discussed, a higher-level meeting at the Financial Services Commission will make a final ruling on whether to penalise Deutsche Bank units at their regular meeting on Feb. 23. (Reporting by Lee Chang-ho and Ju-min Park; writing by Miyoung Kim and editing by Vinu Pilakkott)
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