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June 24, 2017

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Unlawful labor fund management suspected

TAIPEI, Taiwan -- Fund managers of several financial institutions in charge of the nation's labor retirement and pension funds are suspected of manipulating stock prices for private gain, while contributing to more than NT$60 million in loss to the funds.

It was reported in local media that fund managers of First Financial Holding (第一金), Shin Kong Financial Holding (新光金) and Yuanta Financial (元大寶來) were charged to manage a total of eight labor retirement and pension funds. The managers were involved in hiking share prices of Gia Tzoong (佳總), Unic Technology (佶優) and All Ring Tech (萬潤) before selling them to pocket NT$120 million, according to prosecutors.

The Labor Pension Fund Supervisory Committee chairperson Huang Chao-hsi (黃肇熙) said that the committee will certainly seek full compensation if any loss incurred was indeed the result of inappropriate fund management.

None of the suspected three financial institutions are currently in charge of the government's labor retirement and pension funds. If found guilty, they will be banned from managing these funds in the future, Huang said.

In fact, a similar scandal happened in 2011, when ING Securities Investment and Trust Co. was involved in hiking up share prices, resulting in a loss totaling NT$170 million in labor pension and retirement funds. ING shouldered all the loss and was banned from the fund's management for five years.

Government Measures to Cope with the Issue

Since then, both Labor Pension Fund Supervisory Committee and the Financial Supervisory Commission (FSC) have implemented closer monitoring on institutional investors, Huang said, adding that both the Labor Retirement Fund and the Labor Pension Funds have seen good performance this year, profiting over NT$100 billion in total as of June this year.

FSC Chairman Tseng Ming-chung (曾銘宗) also prescribed three measures in response to the latest scandal. First, the FSC will beef up internal audits and related regulations against those jeopardizing investor interests, while supporting prosecutors' investigation. Second, it will promptly carry out punishment for parties found guilty in the investigation. Third, the FSC will order institutional investors to hand out an improvement plan to ensure progress in the investment industry.

The local stock market plummeted at the opening yesterday, but Tseng is still optimistic about the future in the mid and long term. Taiwan is expected to see 3-percent GDP growth this year, he said, adding that there is plenty of capital flowing in the market. Listed companies' revenues have topped NT$14 trillion, growing at 5.5 percent annually, he said.

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