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South Korea probes three foreign brokerages including Goldman

Traders work on the floor of the New York Stock Exchange near the Goldman Sachs stall July 16, 2010. REUTERS/Brendan McDermid
Traders work on the floor of the New York Stock Exchange near the Goldman Sachs stall July 16, 2010. REUTERS/Brendan McDermid

SEOUL (Reuters) - South Korean financial regulators are reviewing three foreign brokerages including Goldman Sachs Group Inc's local unit for possible breach of domestic capital markets regulations, a source at one of the regulators said.

The Financial Supervisory Service (FSS) is investigating whether Goldman Sachs sold foreign bonds in the domestic market through its Hong Kong unit, which does not have any license to sell such products directly in South Korea, the source told Reuters on Monday.

The source declined to be identified due to the sensitivity of the subject and because the probe is still ongoing.

The FSS said on Sunday that it was reviewing three foreign brokerages, without identifying them in its brief statement. The regulator is investigating their business practices to see if they are following domestic capital markets regulations, according to the statement.

Goldman Sachs representatives in Seoul declined to comment.

Regulators are focusing their review on Goldman's sale of Malaysian state-backed securities to domestic investors including Korea Investment Corp, the country's sovereign wealth fund, according to the source.

The local operations of Credit Suisse Group AG and Royal Bank of Scotland Plc are the other two foreign brokerages being investigated, the source said.

Credit Suisse and RBS were not immediately available for comment.

The probe began in late August and is expected to last for another week or so, according to the source.

(Reporting by Chang-ho Lee and Joyce Lee; Writing by Miyoung Kim; Editing by Ryan Woo)

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