SEOUL, September 23 (AJP) - Morgan Stanley has come under scrutiny for suspicious activities related to the sale of a large volume of SK hynix shares just before issuing a sell report.
According to financial sources Monday, the Financial Supervisory Service (FSS) is investigating Morgan Stanley for potential violations of capital market laws. The firm executed a sell order for 1,011,719 shares of SK hynix at its Seoul branch on Sept. 13, two days before releasing a report with a sell recommendation and a downgraded target price.
In a report released on Sept. 15, Morgan Stanley lowered its target price for SK hynix from 260,000 won to 120,000 won and revised its investment rating from "overweight" to "underweight."
Under capital market laws, trading financial investment products for one's own account during the 24 hours following the public announcement of confirmed research analysis data is prohibited. This regulation aims to prevent securities firms from profiting or avoiding losses from specific stocks related to reports that could cause price fluctuations.
If the investigation by the Korea Exchange into Morgan Stanley's alleged front-running uncovers any wrongdoing, the FSS may also look into the firm's unfair trading practices. The Korea Exchange has already begun examining Morgan Stanley's accounts in connection with the allegations of unfair trading.