Park Han-sol reports on Korea's financial regulators, along with fintech and insurance. She previously wrote about the art world, from biennales and exhibitions to fairs and auctions, with a focus on Seoul and the figures shaping the scene. Before joining The Korea Times, she spent a year at ABC News' Seoul bureau, contributing to coverage of major Asia-Pacific events.
Financial regulator's sanctions tested by mounting wave of courtroom battles
The Financial Services Commission offices within Government Complex Seoul / Korea Times photo by Hong In-ki
By Park Han-sol
The Financial Services Commission (FSC) is facing a growing wave of legal challenges as financial firms increasingly contest its sanctions and fines, signaling a broader pushback against the regulator’s more aggressive enforcement stance, according to industry officials, Wednesday.
This rise in litigation has coincided with a string of notable courtroom setbacks for authorities, putting the credibility and practical force of the country’s financial sanctions framework under pressure.
Most recently, U.S. trading firm Citadel Securities secured a lower court victory after contesting an 11.8 billion won ($7.98 million) fine imposed in 2023 over ultra-short-term algorithmic trading.
The case marked Korea’s first financial penalty targeting high-frequency trading and, at the time, represented the largest surcharge ever issued by the FSC. Regulators have since appealed, but the ruling exposed vulnerabilities in the legal rationale of the watchdog’s enforcement approach.
The sharp increase in legal disputes began after amendments to the Capital Markets Act in 2023 substantially raised monetary penalties, prompting both domestic and global investment banks, as well as asset managers, to challenge sanctions through administrative lawsuits.
The number of newly filed cases contesting FSC sanctions rose from 29 in 2021 to 85 in 2025 — nearly a threefold increase.
Although the FSC continues to prevail in many cases, its courtroom losses have become more frequent and increasingly costly. Refunds of fines overturned through litigation jumped from 180 million won in 2022 to 789 million won in 2025.
Several major cases have underscored this growing legal strain. ESK Asset Management, which was hit with the country’s first illegal short-selling fine of 3.8 billion won, won its initial court case overturning the penalty.
European brokerage Kepler Cheuvreux similarly secured a lower court ruling canceling a 1 billion won fine tied to illegal short selling.
Although regulators later won both cases on appeal, the repeated lower court defeats have cast doubt on the legal durability of the FSC’s punitive measures.
And more high-stakes legal battles are still underway, including cases involving BNP Paribas, which is contesting a 19 billion won penalty, and Credit Suisse, which faces a 27.1 billion won fine.
As these courtroom battles continue to pile up, concerns are deepening that repeated legal setbacks could gradually weaken regulatory authority and erode broader confidence in Korea’s financial enforcement system.
“These cases reveal that while the severity of sanctions has increased significantly, regulators lack the evidentiary support and legal precision needed to uphold those penalties,” said Hwang Suk-jin, a professor at Dongguk University’s Graduate School of International Affairs and Information Security.
“Areas such as unfair trading practices and illegal short selling involve highly complex factual circumstances. Regulators must legally establish intent, scope of responsibility and causality with great precision.”
The professor said this shifting legal landscape has increasingly made courtroom battles a routine strategic option for financial firms, particularly as surging fines and penalties have made passive acceptance of regulatory action far more burdensome.
“As penalty amounts grow larger, rather than simply accepting sanctions at the administrative stage, firms are making the decision to pursue litigation and receive a definitive judicial ruling in hopes of overturning fines or avoiding business suspensions,” he said.
He added companies may also feel compelled to challenge sanctions out of fiduciary responsibility, warning that repeated courtroom defeats for regulators could carry broader institutional consequences.
“If supervisory authorities continue to lose in court, questions over the effectiveness of sanctions will inevitably intensify. Public trust in enforcement power, the legitimacy of sanctions and the broader regulatory framework can erode significantly.”