South Korean financial authorities have been looking into whether U.S.-based hedge fund Elliot Associates complied with the stock disclosure rule in the process of acquiring shares of a Samsung affiliate in June, sources familiar with the matter said Sunday.
Elliot had sought to block Samsung’s plan to merge Samsung C&T Co. and Cheil Industries Inc. through a proxy vote and legal battles. All of its efforts failed, and the merged entity was launched in September.
The Financial Supervisory Service (FSS) has been reviewing whether Elliot followed the local financial rule that requires investors to report stock ownership greater than 5 percent to regulators within five days.
On June 4, Elliot announced that it owns a 7.12 percent stake in Samsung C&T and opposed Samsung’s merger plan, arguing the all-stock deal worth 8.9 trillion won (US$7.8 billion) undermines the interests of C&T’s shareholders. It had 4.95 percent in the construction unit until June 2.
The sharp hike in stakes in just one day has raised allegations that Elliot may have bought the shares in advance through other channels and reported them later.
Share prices of Samsung C&T slipped 0.79 percent on June 3, on the day Elliot said it bought 2.17 percent of shares, corroborating such suspicions in the market.
“Elliot was involved in many trades in the process of (increasing shares in Samsung C&T), and some of them are under suspicions of violating the stock ownership disclosure rule,” the source said, speaking on the condition of anonymity.
Elliot’s legal representative has recently sent a document claiming the hedge fund’s stock transaction abided by the local regulations, the source said, noting the probe is expected to end no later than next month.
In South Korea, financial regulators usually give warnings to violators of stock disclosure rules.