Several employees of Deutsche Bank's South Korean securities unit have resigned, people familiar with the situation said Friday, a move that comes as the unit serves a partial suspension of its operations after being sanctioned by local regulators earlier this year on charges of stock manipulation.
John Chang, the managing director and head of the securities unit's equities trading operations, is among those who have resigned, the people said.
One of the people told Dow Jones Newswires that Chang and other former Deutsche Securities Korea employees are set to join Barclays' Korean operations. A mix of traders, salespeople and researchers are believed to have resigned from the Deutsche unit but it wasn't immediately clear exactly how many people are leaving the unit.
Though the departures likely represent a fraction of the local Deutsche securities unit's total headcount of around 100, the news nevertheless marks the latest blow on the German bank's operations in South Korea. Deutsche Securities Korea was slapped with a six-month ban starting April 1 for its proprietary securities and exchange-listed derivatives trading operations by local financial authorities in February--the harshest penalty ever levied against a securities firm in the country.
The Securities and Futures Commission, a body within financial regulator Financial Services Commission, ruled that Deutsche engaged in improper arbitrage trading between the futures and spots markets on Nov. 11, causing a sharp fall in the benchmark Korea Composite Stock Price Index in the last 10 minutes of trading on that day.
The commission said Deutsche employees sold KRW2.44 trillion's worth of stocks that are part of the Kospi 200 index in the last 10 minutes of trade after having set up "speculative derivative positions" in the form of short futures and put options. The Deutsche employees made an "illegal profit" of KRW44.87 billion through the arbitrage trading, the commission said at the time.
The authority also filed a complaint to local prosecutors against three employees at Deutsche Bank Hong Kong, one employee at Deutsche Securities Korea and one employee at New York Deutsche Bank Securities Inc. that it said orchestrated the arbitrage trade. Local prosecutors' investigation is ongoing.
-Nisha Gopalan in Hong Kong contributed to this article.
Se Young Lee is a reporter for Dow Jones Newswires, where this story originally appeared. Write to him here.