[Asia Economy Reporter Park Cheol-eung] Lawmakers with backgrounds in finance are consecutively proposing bills aimed at individual investors (retail investors) and financial consumers. Consequently, listed companies and financial firms are likely to face increased burdens.
Lee Yong-woo, a Democratic Party lawmaker who previously served as head of asset management at Korea Investment & Securities and CEO of KakaoBank, on the 12th introduced a bill to amend the Financial Consumer Protection Act. The amendment requires financial companies to accept the Financial Supervisory Service’s Dispute Mediation Committee’s settlement if only the consumer accepts it.
The Dispute Mediation Committee is a mechanism that resolves disputes through an independent committee without going through litigation. Currently, a settlement has legal effect only when both the financial company and the consumer accept it. Lee’s amendment proposes that in small-amount dispute mediation cases, if the consumer accepts the settlement, it will have the effect of a court settlement regardless of the company’s consent.
The background for this proposal is the frequent behavior of financial companies delaying by refusing to accept settlements or filing lawsuits. Lee said, "Ordinary financial consumers are inevitably the weaker party compared to financial companies," and added, "This aims to strengthen the protection of consumers’ rights by improving the dispute mediation system."
Lee previously proposed a special law targeting only listed companies. The core of this bill is the introduction of a mandatory tender offer system requiring new major shareholders to publicly purchase a certain minimum percentage of shares held by minority shareholders when a listed company is acquired, to protect small shareholders. It also includes provisions for establishing qualifications for executives, strengthening requirements for outside directors, partial voting rights restrictions on major shareholders, shareholder approval for transfer or acquisition of significant assets, and prohibition of treasury stock succession to newly established spin-off companies.
The motivation behind this is to ensure equal treatment of major and minority shareholders. Lee stated on his blog, "Shareholders are the owners of the company. Management, acting on behalf of the owners, must treat shareholders equally," and warned, "There is a possibility that management may pursue their own interests rather than those of shareholders, harming shareholder interests." He also emphasized, "This is not a left-right issue but a matter of market order."
Hong Sung-kook, a Democratic Party lawmaker and former CEO of Mirae Asset Daewoo, recently introduced a bill to amend the Capital Markets and Financial Investment Business Act to eradicate illegal short selling, which has been a major grievance among individual investors.
The bill proposes raising penalties from the current maximum fine of 100 million KRW to a surcharge based on the order amount, and introducing criminal penalties including imprisonment of one year or more, or fines ranging from three to five times the illicit gains. The goal is to change the perception that "even if caught, the punishment is light."
Hong explained, "Fines are non-punitive monetary sanctions imposed for minor violations and have been criticized for being too low compared to the illicit gains from illegal short selling, failing to deter criminal intent," adding, "Compared to countries like the U.S., which imposes up to 20 years imprisonment, or France, which fines up to ten times the illicit gains, our country’s penalties are excessively lenient."
Yoon Chang-hyun, a United Future Party lawmaker who formerly served as president of the Korea Institute of Finance and chairman of the Public Fund Management Committee, proposed three bills to protect insurance consumers. A representative measure is a simplification plan requiring medical institutions to electronically transmit supporting documents necessary for claiming indemnity insurance benefits, such as medical bills, to insurance companies.
Yoon pointed out, "Indemnity insurance subscribers face inconvenience having to obtain and submit related documents like medical receipts directly from hospitals or pharmacies to insurance companies, leading many to give up on claiming insurance benefits." He also proposed a bill assigning primary liability for damages to corporate insurance agencies when insurance planners cause consumer harm during recruitment, and strengthening penalties for insurance fraud by industry insiders compared to general insurance fraud.
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