Morgan Stanley faces regulatory scrutiny over SK hynix share sale

South Korea’s Financial Supervisory Service (FSS) is set to launch an investigation into Morgan Stanley over its large-scale sell order of SK hynix Inc. shares, which preceded the release of a report downgrading the chipmaker’s rating.

The investment bank sold approximately 1.01 million shares of SK hynix on September 13, two days before publishing a report on September 15 that cut its target price from 260,000 won to 120,000 won and downgraded its rating. The report cited a bleak outlook for memory chip prices.

This unusual timing has raised concerns about potential insider trading. The FSS plans to examine whether Morgan Stanley violated its obligations under the Capital Markets Act regarding the handling of research and analysis reports.

The Korea Exchange has already initiated a regulatory probe into the circumstances surrounding Morgan Stanley’s actions. If suspicious transactions are found, the exchange will forward the data to the FSS for further investigation.

Under the Capital Markets Act, publishers of market analysis reports are prohibited from trading financial investment products subject to their analyses for 24 hours to prevent insider trading.

An FSS official stated that the watchdog will conduct a separate investigation into any potential violations of regulations concerning the preparation and distribution of research reports, in addition to the Korea Exchange’s probe.

Attribution: Yonhap News Agency

Subediting: M. S. Salama