The Financial Supervisory Service said Sunday that it had launched a special probe into the securities subsidiary of debt-laden Tong Yang Group for an indefinite period.

The financial regulator will look into Tong Yang Securities, which is suspected of illicit bond underwriting of its affiliates, and find out whether it has used its customers’ money to invest in those bonds.

This is the first time in 15 years the FSS has launched such an “exclusive investigation.”

“Given the severity of the matter, the investigation will not end until the market regains stability,” an FSS official said.

This comes amid growing complaints by customers claiming that Tong Yang Securities did not properly introduce and explain those debt securities.

Even though institutional investors unloaded their bonds of Tong Yang units, more than 40,000 retail investors invested in bonds and commercial papers of those companies through Tong Yang Securities.

The financial regulator is also looking into whether Lee Hye-kyung, vice chairwoman and wife of Tong Yang chairman Hyun Jae-hyun, withdrew 600 million won ($562 million) from her account at the brokerage house, a day after the group filed for a court receivership.

Allegations include whether Lee’s account was set up for slush funds.

“If this is true, they deserve public criticism and punishment from the Financial Services Commission and the Financial Supervisory Service,” said Shin Je-yoon, chief of the FSC, in a Cabinet council meeting last Friday.

Emerging social and moral issues concerning Tong Yang and its family shareholders prompted the financial regulator to further strengthen its oversight of its units by launching the special probe, the FSS added.

By Chung Joo-won (joowonc@heraldcorp.com)