Supreme Court sides with Woori Chairman in DLF case

Woori Financial Group Chairman Son Tae-seung / Courtesy of Woori Financial Group

FSC, FSS say they respect court's decision

By Anna J. Park

Woori Financial Group Chairman Son Tae-seung won a final victory in his legal battle to repeal a punitive measure imposed on him by local financial authorities, after the Supreme Court ruled in his favor.

The Supreme Court ruled Thursday that it found no problems in the legal reasoning of the first and the appeals trials which sided with Son's request to annul punitive measures financial authorities imposed on him over Woori Financial's improper selling of high-risk derivative linked funds (DLFs).

In early 2020, the Financial Supervisory Service (FSS) reprimanded Son, which is categorized as a severe punishment that puts legal restraints on his employment at financial institutions for the next three years. The FSS' rationale for the censure was that Woori Bank's aggressive sales and poor internal control led to the mis-selling of DLFs, holding Son responsible for failing to set up internal control standards to prevent such financial accidents.

Back then, the Woori Financial chairman filed a court injunction to freeze the effect of the reprimand, which he won, and then filed a suit with the administrative court to nullify the punishment. The first and the appeal courts ruled in Son's favor, in August 2021 and July 2022, respectively, stating that the reprimand lacked a legal basis. As the Supreme Court's ruling on Thursday also sided with the lower courts' decisions, Son is now free from legal burden.

“The current law and regulations do not provide legal grounds for reprimanding the chiefs of financial institutions over their firms' failure to abide by internal control standards. The Supreme Court's decision shows that there should be a distinction between a firm's violation of duty to draw up internal control criteria and a firm's failure to obey such internal control regulations,” a court official explained.

Financial authorities said that they respect the court decision.

“The Financial Services Commission (FSC) respects the Supreme Court's decision, and plans to refer to the case in future legal cases regarding financial companies' internal control criteria. The FSC will also reflect the case in making necessary changes in the system,” the FSC said in a statement.

The FSS also said that it plans to come up with effective measures to address financial companies' internal control issues, together with the FSC.

Woori Financial Group also said that it respects the court's decision and vowed to closely communicate with the financial authorities to set up an exemplary internal control system.

“The financial group has consistently provided compensations to victims during the time. At the same time, the group will continue to put its priority on establishing an exemplary internal control system, while closely communicating with the authorities,” an official from Woori Financial Group said.

With the ruling that annuls the FSS' imposition of punitive measure against Son, the Woori Financial chief is now legally qualified to campaign for his third term as the head of the financial group. Son's second term will end in March of next year.

However, considering the fact that the chiefs of other major financial groups decided not to run for another term, it remains uncertain whether Son could still be tapped to lead the group for the third time.

Meanwhile, Woori Financial is slated to hold a board meeting on Friday. Although this board meeting is not expected to discuss the matter of the group's next chairman, the market's focus is on the group's next moves regarding the selection of its next chairman.