FSS notifies Shinhan, KB, Daishin Securities chiefs of sanctions

By Kim Bo-eun

Financial Supervisory Service's logo on its building on Yeouido, Seoul / Korea Times file

The Financial Supervisory Service (FSS) said Wednesday it has notified the CEOs of distributors of Lime Asset Management's investment products of the level of sanctions that will be reviewed for them later this month.

The supervisory agency declined to specify the firms, but reports have stated they are Shinhan Investment, KB Securities and Daishin Securities. FSS Governor Yoon Suk-heun said earlier that brokerages would be the first to become subject to sanctions. Financial firms subject to sanctions also include Lime and banks that distributed its products.

"We have notified the current and former CEOs of three firms of the weighty sanctions, and the sanctions will be reviewed at a committee meeting to be held Oct. 29," an FSS official said.

The agency has also notified the firms of institutional sanctions, for malfunctioning internal control systems that led to their distribution of the poorly managed investment products that caused losses for investors.

The sanctions for the CEOs have been reported to be heavy, barring the executives from serving positions at financial firms for up to five years.

Officials from the FSS division in charge of inspecting securities firms and the CEOs subject to the sanctions will be present at the sanctions review committee meeting later this month. The FSS sanction review panel draws a conclusion on the level of sanctions to be imposed, which is then forwarded along the chain to finalization.

Considering previous cases, it appears unlikely that the FSS will alleviate the level of sanctions for the CEOs. In this case, the CEOs will likely take action to fight the sanctions.

In March, financial authorities imposed sanctions on former Woori Bank CEO Son Tae-seung and Hana Financial Group Vice Chairman Ham Young-joo over their responsibility in the two banks' mis-selling of derivative-linked funds that incurred major losses for investors last year. They were imposed by the same level of sanctions that prevented them from serving positions at financial firms.

Both Son and Ham filed suits to nullify the sanctions and injunctions to prevent the sanctions from going into effect. In both cases, courts accepted the injunctions, allowing the executives to continue serving their terms. Son currently serves as chairman of Woori Financial Group.

Financial firms refer to the absence of legal grounds for financial authorities to punish CEOs in addition to institutional sanctions. Proposed revisions to regulations on corporate governance that enable the punishment of CEOs when the company's internal control system is seen to have failed remain pending at the National Assembly.