[Asia Economy Reporters Ji Yeon-jin and Park Ji-hwan] On the 23rd, Jeong Eun-bo, Governor of the Financial Supervisory Service (FSS), reiterated that the decision to impose a fine of 50 billion KRW related to market makers' market order disruption activities is being "reconsidered, including the scale of the fine."
Governor Jeong made this remark during a meeting with CEOs of securities firms at the Kensington Hotel in Yeouido, Seoul, on the same morning. Earlier, the FSS announced plans to impose fines totaling 48 billion KRW on nine securities firms for repeatedly disrupting market order through quote submissions. However, as there was strong opposition claiming that the level of sanctions against market maker activities aimed at securing liquidity was excessive, Governor Jeong had already expressed his intention to reconsider the matter during last month's National Assembly audit and reiterated this promise at this meeting.
In his opening remarks on the same day, Governor Jeong also stated, "We will secure predictability and acceptability of sanctions through sufficient communication," and added, "If securities firms voluntarily improve and take corrective actions, we will respect those results."
Regarding the direction of supervision and inspection of securities firms, he presented ▲ adherence to laws and principles ▲ harmony and balance between proactive and reactive supervision ▲ strengthening preventive supervision to protect financial consumers. He emphasized, "To this end, we will strengthen on-site, close-contact continuous monitoring functions to focus our capabilities on detecting vulnerable risk areas in advance."
He continued, "If incidents such as incomplete sales occur again in a situation where trust in the capital market is low following the private equity fund incident, the loss of trust in the capital market will become irreversible," and urged, "As individual investors have recently increased significantly, securities firms should pay special attention to consumer protection through strengthening internal controls such as ‘complete sales.’"
Governor Jeong also said, "Along with institutional improvements in the underperforming retirement pension market, we will actively support the development of pension products that can realize stable long-term returns, such as the introduction of default options for DC-type plans and the establishment of reserve management committees and preparation of operation plans for DB-type plans," adding, "To meet the diverse investment demands of the public, we will promote adjustments to risk values related to asset management in green finance such as carbon emission permits, listed REITs, and real estate finance."
At the meeting, the CEOs of securities firms agreed that, in preparation for domestic economic uncertainties such as global economic instability, rapid increase in private debt, and financial imbalances, securities firms need to manage potential risk factors stably in addition to pursuing profitability, according to the FSS.
After the meeting, Governor Jeong held a Q&A session with reporters on major capital market issues. He expressed his intention to make a final decision on the adjustment of the 48 billion KRW fine imposed on nine securities firms based on the results of the Korea Exchange’s ongoing two-week inspection of the market maker system overall.
Governor Jeong said, "We have been reviewing the entire process related to market makers since 2016," adding, "We are considering adjusting the fines so that the level of responsibility matches the necessary accountability." He also stated, "We plan to promote improvements to the entire market maker system, taking into account overseas cases during the Korea Exchange’s inspection process." He noted, "There is a possibility that the fines will be adjusted, but the final decision will be made after reviewing the inspection results and determining the timing." When asked by reporters about the possibility of withdrawing the fines, he was cautious, saying, "We will make the final decision after reviewing various operational situations related to market makers."
Regarding the future operation of comprehensive inspections in the securities industry, he said, "The currently operating comprehensive inspections seem to be a core part of reactive supervision," and added, "Regardless of the name, we plan to place more emphasis on preventive inspections while balancing reactive inspections with proactive ones such as stress tests."
On the Celltrion accounting fraud controversy, Governor Jeong said, "The Audit Committee, an accounting advisory body under the Financial Services Commission, is currently discussing related matters," and added, "It is practically difficult to mention specific details."
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