FILE PHOTO: A Hyundai Motor's booth is seen near the Pyeongchang Olympic Plaza in Pyeongchang, South Korea, February 11, 2018. REUTERS/Kim Hong-Ji/File Photo

SEOUL (Reuters) - South Korea’s antitrust chief on Thursday said U.S. activist fund Elliott Management’s proposal for Hyundai Motor Group to adopt a holding company structure was “inappropriate” and, if implemented, would be in violation of antitrust law.

The proposal includes Hyundai’s financial subsidiaries falling under the ownership of a non-financial entity, which is prohibited by law, Yoon Soo-hyun, a spokesman at the Korea Fair Trade Commission, said in confirmation of the commissioner’s comments made at an event in Seoul.

“Elliott’s demand is inappropriate and if it (Hyundai) accepts the demand it can breach the fair trade act,” Kim Sang-jo, the commissioner, said.

Elliott declined to comment.

Elliott on Monday said the restructuring plan of South Korea’s second-largest conglomerate was insufficient. Instead, it called on the autos-to-steel group to introduce a holding company structure, boost shareholder returns and appoint more independent board members.

Elliott proposed Hyundai Mobis Co Ltd 012330.KS be combined with Hyundai Motor Co 005380.KS to create a holding company which would also include financial subsidies such as Hyundai Capital and Hyundai Card Co Ltd [HYMTRH.UL].

In presentation material that contains the fund’s proposal, Elliott noted that Hyundai would have up to a two-year grace period to resolve the issues regarding a holding company’s ownership of financial subsidiaries under the fair trade act.

Kim Woo-chan, a finance professor at Korea University Business School, said Hyundai was unlikely to accept the proposal on the holding company because it does not involve Hyundai Glovis Co Ltd 086280.KS, whose biggest shareholder is Hyundai Motor's vice chairman and heir apparent, Chung Eui-sun.

“Elliott’s proposal is unrealistic,” the professor said.