The head of the state financial regulator said his agency is considering seeking to penalize Kakao Corporation over alleged stock manipulation in its acquisition of SM Entertainment.

Speaking to reporters on Tuesday, Financial Supervisory Service(FSS) Governor Lee Bok-hyun said an active and comprehensive review is under way, adding a decision would be made when the agency transfers the case to the prosecution within the week.

Stressing that the development of the capital market requires a clear signal that the state will respond appropriately to unfairness or illegalities, the chief regulator said those involved will be held accountable considering the impact of the alleged manipulation.

He said aside from fines or penalties, the agency will seek to obstruct the establishment of corporate or economic structures sought by the involved parties through illegal transactions.

Following an overnight questioning of Kakao founder Kim Beom-su, the FSS is set to summon company CEO Hong Eun-taek and Kakao Entertainment CEO Kim Sung-soo Tuesday afternoon.

The company's management is suspected of inflating share prices of SM, one of the country's biggest K-pop management firms, in an alleged obstruction of a takeover bid earlier this year by Hybe, the parent company for BTS' management agency BigHit.

Kakao is also accused of failing to fulfill the compulsory declaration on their stock acquisition.

Last week, a Seoul court issued a pretrial detention warrant for Kakao chief investment officer Bae Jae-hyun over the allegations.