Son Tae-seung Begins Legal Battle Over 'DLF Heavy Sanctions'... Files Lawsuit to Cancel Penalties

Son Tae-seung, Chairman of Woori Financial Group

[Asia Economy Reporter Kim Hyo-jin] Sohn Tae-seung, Chairman of Woori Financial Group, has begun a legal battle challenging the heavy disciplinary action related to losses from overseas interest rate-linked derivative-linked funds (DLF).

According to the financial sector on the 9th, Chairman Sohn filed a lawsuit at the Seoul Administrative Court the day before, requesting the cancellation of the disciplinary warning issued by the Financial Supervisory Service (FSS) regarding the DLF incident. At the same time, he applied for a suspension of the enforcement of the disciplinary action until a ruling on the lawsuit is made.

The suspension of enforcement is a procedure that precedes the main lawsuit and usually results within a few days. However, if appeals continue between both parties in the main lawsuit, it may take years before a final judgment is reached.

The court grants suspension of enforcement if it recognizes an urgent need to prevent irreparable damage to the parties caused by specific administrative actions. If Chairman Sohn temporarily resolves the FSS’s disciplinary issue through this, his reappointment will not be hindered.

Conversely, if the court dismisses the application and maintains the effect of the disciplinary warning, which is a heavy sanction, it will be difficult for Chairman Sohn to be reappointed. Although he can complete the remaining term, he will be restricted from employment in financial companies for three years. Woori Financial recommended Chairman Sohn as the next chairman candidate for a three-year term at the end of last year and plans to officially appoint him at the shareholders’ meeting on the 25th.

The FSS notified the inspection report containing the disciplinary measures against Chairman Sohn and Woori Bank on the 5th. The sanctions take effect at the time of notification of the inspection report.

The disciplinary warning against Chairman Sohn was approved last month by FSS Governor Yoon Seok-heon, and the sanctions against the institution (Woori Bank)?a fine of 19.7 billion KRW and a six-month partial suspension of business?were finalized last week at the regular meeting of the Financial Services Commission. The FSS initially proposed a fine of 22.7 billion KRW against Woori Bank, but it was reduced through the Securities and Futures Commission under the Financial Services Commission.

The FSS decided on the disciplinary warning against Chairman Sohn based on the Financial Company Governance Act, which stipulates that “financial companies must establish internal control standards,” and its enforcement decree, which requires “effective internal control standards.” It was determined that the obligation to establish internal control standards was not fulfilled.

In the upcoming legal battle, the key issue is expected to be whether it is appropriate to hold management responsible for financial accidents under these regulations. Chairman Sohn’s side argues that these provisions do not provide a direct basis for imposing sanctions on management when a financial accident occurs.