[Exclusive] Lime and Optimus Scandal Securities Firm CEO Sanction Proposal Submitted... Final Decision May Be Delayed to December Due to Last-Minute Disputes

Discussed at the Agenda Subcommittee on the 23rd... Scheduled for the Regular Meeting Agenda on the 29th
Intense Debate on Severe Disciplinary Proposals for Park Jeongrim and Jeong Yeongchae, Yang Hongseok Hopes for Mitigation

The Financial Services Commission's decision on whether to finalize the CEO sanctions related to Lime and Optimus fund sales companies at the regular meeting scheduled for 2 p.m. on the 29th is drawing attention. The targets are Jung Young-chae, President of NH Investment & Securities, Park Jung-rim, President of KB Securities, and Yang Hong-seok, Vice Chairman of Daishin Securities. It has been confirmed that the CEO sanctions proposal was finally submitted as an agenda item for this regular meeting.

According to a senior official from the financial authorities, the securities company CEO sanctions proposal was not submitted as an agenda item by the evening of the previous day because the agenda subcommittee and ministerial reporting procedures had not been completed. If the agenda was not submitted, the final discussion was expected to be postponed to the next month's regular meeting. However, it was decided that the agenda would be finally submitted that morning.

However, since there is no consensus on the heavy disciplinary sanctions proposal for Presidents Park Jung-rim and Jung Young-chae, there remains a possibility that the Financial Services Commission may postpone the decision on their sanctions to next month. Regular meetings are usually held every other Wednesday. If a unanimous conclusion is not reached at this regular meeting, the final decision on the securities company CEO sanctions is expected to be made at the regular meeting on a Wednesday next month. However, the plan is to finalize it within this year. Kim Joo-hyun, Chairman of the Financial Services Commission, said, "We will finalize the CEO sanctions within this year."

The financial authorities' sanction review process goes through the stages of 'Financial Supervisory Service (FSS) Sanctions Review Committee → Agenda Subcommittee → Financial Services Commission Securities and Futures Commission → Financial Services Commission Agenda Subcommittee → Financial Services Commission Regular Meeting Resolution.' Fines and penalties for financial companies go through the Securities and Futures Commission in advance, but executive sanctions or business suspensions of institutions are reviewed and resolved by the Financial Services Commission.

In November 2020, the FSS held a sanctions review committee meeting and decided on heavy disciplinary sanctions of 'reprimand warning' for Park Jung-rim, President of KB Securities, and Yang Hong-seok, Vice Chairman of Daishin Securities, citing violations such as failure to establish internal control standards related to the Lime fund incident (violation of the Financial Company Governance Act). In March 2021, the FSS also resolved a heavy disciplinary sanction of 'reprimand warning' for Jung Young-chae, President of NH Investment & Securities, for violations including failure to establish internal control standards related to the Optimus fund sales. The FSS sanctions review is an advisory body to the Financial Supervisory Service Commissioner and does not have legal effect; the final decision must be made through the Financial Services Commission's resolution to take effect.

The Financial Services Commission suspended the review of disciplinary proposals for sales company CEOs after the end of March last year. At that time, the FSC explained the suspension reason as "It is necessary to sufficiently confirm and review consistency and coherence among sanctions, the court's stance on similar cases, and the impact on stakeholders before proceeding with the review." The review was resumed earlier this year. The discussion was resumed after the appellate court confirmed the cancellation of the FSS's reprimand warning sanction against Son Tae-seung, former Chairman of Woori Financial Group, who filed an administrative lawsuit to cancel the heavy disciplinary sanction he received from the financial authorities related to the derivative-linked fund (DLF) loss incident.