Discussion on Securities Firm Disciplinary Proposal
Heightened Attention on Whether to Amend Original Plan
[Asia Economy Reporter Park Ji-hwan] The disciplinary review of securities firms that sold Lime Asset Management funds is moving to the Financial Services Commission's Securities and Futures Commission. Attention is focused on whether the securities firms, which received lighter penalties than initially proposed in three previous disciplinary hearings by the Financial Supervisory Service, will receive even more lenient sanctions this time.
The Securities and Futures Commission under the Financial Services Commission will hold a regular meeting on the afternoon of the 25th to review disciplinary measures against Shinhan Financial Investment, Daishin Securities, and KB Securities, which sold Lime funds. In the Financial Supervisory Service's disciplinary hearings, Shinhan Financial Investment and KB Securities were subjected to partial business suspension orders, while Daishin Securities faced the closure of its Banpo WM Center in Seoul. Additionally, these securities firms were fined tens of billions of won.
The final level of disciplinary action against the securities firms is expected to be decided at the Securities and Futures Commission meeting that day. Although a regular meeting of the Financial Services Commission is scheduled for early next month as a procedural step, based on past cases, it is widely believed that decisions made by the Securities and Futures Commission are unlikely to be overturned by the Financial Services Commission.
The securities industry's focus is on whether the Financial Supervisory Service's disciplinary decisions will be further relaxed by the Securities and Futures Commission. Securities firms are expected to actively present explanations regarding efforts to compensate investors, such as preparing pre-compensation plans for investors and accepting compensation decisions from the Financial Supervisory Service's Dispute Mediation Committee.
The disciplinary measures against securities firms' chief executive officers (CEOs), which was initially the most anticipated issue, will not be addressed at this Securities and Futures Commission meeting but will be discussed at the Financial Services Commission's regular meeting next month. This is because the Securities and Futures Commission reviews fines and penalties, while business suspensions of institutions and sanctions against executives such as CEOs are directly reviewed and decided by the Financial Services Commission. On the 10th, the Financial Supervisory Service issued a 'reprimand warning' to Park Jeong-rim, CEO of KB Securities; 'suspension from duty' to Na Jae-cheol, chairman of the Korea Financial Investment Association (former CEO of Daishin Securities), Kim Hyung-jin, former CEO of Shinhan Financial Investment, and Yoon Kyung-eun, former CEO of KB Securities. Kim Seong-hyun, CEO of KB Securities, and Kim Byung-cheol, former CEO of Shinhan Financial Investment, received a mild disciplinary action of 'cautionary warning.' If the severe disciplinary measures are finalized, the affected CEOs will be barred from reappointment and employment in the financial sector for 3 to 5 years. In the case of KB Securities, where the only current CEO is Park Jeong-rim, a follow-up CEO appointment may be inevitable.
Depending on the final disciplinary level, there is also a possibility that securities firms may file administrative lawsuits, similar to the Derivative Linked Fund (DLF) incident. During the DLF incident, Son Tae-seung, chairman of Woori Financial Group and then bank president, and Ham Young-joo, vice chairman of Hana Financial Group, filed administrative lawsuits and injunctions to suspend the enforcement of disciplinary actions after opposing the financial authorities' severe sanctions.
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