One of the world’s largest “fat-finger” errors is creating more problems for Samsung Securities Co., a stock-trading arm of South Korea’s Samsung conglomerate and one of the country’s largest brokerages.
South Korea’s National Pension Service on Tuesday said it would cut ties with Samsung Securities, after it last week accidentally issued close to $105 billion worth of shares to its employees. The decision was due to “concerns of poor safety measures following the financial accident,” an NPS spokesman said.
The world’s fourth-largest public pension fund, the NPS said it would stop sending orders to Samsung Securities, which it had previously used to process an undisclosed volume of its domestic stock trades.
The fiasco unspooled last Friday, when a Samsung Securities employee caused the firm to pay out a massive dividend in the form of its own shares to 2,018 employees who were members of a company stock-ownership scheme.
The dividend was supposed to be 1,000 won ($0.94) per share. But the employee mistook the form of measurement, confusing won and shares. The error caused Samsung Securities to issue a dividend that was 1,000 times the value of each share held by the group of employees.
In all, the company deposited 2.8 billion shares worth 111.8 trillion won ($104.8 billion) into employee accounts—more than 30 times the company’s existing issued shares.
A Samsung Securities spokeswoman said the firm realized the mistake shortly after, but failed to take immediate action.
Sixteen staff members sold a collective five million shares worth about $186.9 million minutes shortly after receiving them. It took the brokerage 37 minutes to completely block employees from selling the accidental shares, according to South Korea’s Financial Supervisory Services, a financial watchdog.
Some of the 16 staffers sold stock despite receiving warnings from the company not to do so, the FSS said. Samsung Securities said employees who had done so—along with the employee who had made the initial calculation mistake—have been temporarily suspended from their duties.
“We will actively compensate investors who suffered as a result of the temporary sale,” the Samsung Securities spokeswoman said Tuesday, adding that the firm has also launched an investigation to review its systems and internal controls. The Korea Securities Depository said Tuesday that all problematic transactions involving Samsung Securities shares had been resolved.
The incident adds to issues South Korea’s largest conglomerate has faced in the past year, including the jailing of its de facto heir Lee Jae-yong during a high-profile corruption probe. Mr. Lee, who was released on a suspended sentence in February, has appealed his case to the Supreme Court.
The FSS this week called Friday’s incident “a major financial accident that has severely undermined the safety and trust of the capital market.” It will launch an investigation to determine the cause of the incident and review Samsung Securities’ response measures.
FSS head Kim Ki-sik on Tuesday met with 16 brokerage chiefs in Seoul to request stronger protections for investors.