[Column] Financial Services Commission and Financial Supervisory Service's Blame Game Draws Frowns

[Asia Economy Reporter Park Jihwan] Following last year's 1.7 trillion won Lime Asset Management scandal, the recent large-scale suspension of redemptions in private equity funds, including Optimus Asset Management, has sparked intense blame-shifting between the Financial Services Commission and the Financial Supervisory Service, both responsible for management and supervision.

On the 6th, the Financial Supervisory Service branch of the National Office and Financial Services Labor Union issued a statement titled "The FSC Withdraws from the Full Investigation," sharply criticizing, "While mobilizing the Korea Deposit Insurance Corporation and Korea Securities Finance Corporation, which are completely unrelated to the private equity fund scandal, the FSC is stepping back to avoid responsibility." The FSS union also openly criticized Financial Services Commission Chairman Eun Sung-soo on the 25th of last month, calling him "shameless" and "reckless."

This criticism began after the FSC announced its plan for a full inspection of private equity funds. The FSS union raised their voices, claiming that the FSC, which caused problems through deregulation, is trying to evade responsibility by pushing all supervisory negligence onto the FSS.

The FSC has decided to conduct a full inspection over three years on 233 asset management companies and 10,304 private equity funds as a countermeasure to the suspension of redemptions. This decision is based on the judgment that the cause of the private equity fund incidents was due to some operators' misconduct and incomplete sales by distributors.

On the 2nd, Sohn Byung-doo, Vice Chairman of the FSC, pointed out at a joint meeting for a comprehensive inspection of financial consumer damage, "In the case of private equity funds, some asset managers have neglected risk management or committed illegal acts during fund design and operation, and suspicions of incomplete sales by distributors continue to be raised." The FSC's position is that the root cause of the private equity fund failures lies not in the system itself but in financial companies exploiting it and the supervisory authorities' lack of vigilance.

However, the FSS believes that the FSC's excessive deregulation has exacerbated the situation. They argue that when the FSC significantly lowered market entry barriers in 2015, unqualified private fund managers proliferated, and as the market, once a playground for professional investors, became accessible to the general public, the damage increased.

While the FSC and FSS shift responsibility onto each other, there are others shedding tears: the victims. These individuals face the risk of losing money they painstakingly saved over their lifetime, intended for retirement funds and other purposes, in an instant. One private equity fund victim lamented, "Seeing the financial authorities, whom I thought were on my side, recently blaming each other, I feel I must fight this lonely battle alone."

Realistically, the financial authorities are the only ones these victims can rely on for relief. Instead of blaming each other when cooperation is desperately needed, such behavior does not help resolve the situation at all. Is it too much to hope that the financial authorities focus on the people who lose sleep every night over this issue before disputing responsibility? We hope the financial authorities will prioritize concern for the victims, that is, the people.