FSS Orders Securities Firms to Fundamentally Improve Internal Controls

Securities Firms' Ethics Management and Internal Control Workshop on the 27th

The Financial Supervisory Service (FSS) and the Korea Financial Investment Association (KOFIA) jointly announced on the 27th that they held a 'Securities Firms Ethical Management and Internal Control Workshop.'

The regulatory authorities shared recent inspection cases, internal control vulnerabilities in the securities industry, and best practices. They also presented recent industry issues such as the introduction of accountability structures and held a Q&A session.

The FSS emphasized that financial accidents have occurred due to a combination of factors including a management culture focused only on short-term performance, lack of compliance awareness among some executives and employees, and inadequate internal control systems. They urged securities firms to fundamentally improve their internal control systems to foster a 'customer-centered management culture' and to establish effective control procedures to eradicate financial accidents.

The securities industry presented 'compliance monitoring cases through organic linkage with risk management organizations.' They also shared the need for company-wide efforts through interdepartmental collaboration systems.

KOFIA announced amendments to its model code, including standards for reporting financial crimes, to eradicate unsound business practices. They designated a general department responsible for reporting financial crimes and strengthened reporting procedures and standards to ensure that serious financial crimes such as breach of trust, embezzlement, and fraud are promptly reported to investigative authorities.

Additionally, in preparation for the introduction of accountability structures following the amendment and enforcement of the Corporate Governance Act, they held discussions with external research agencies to discuss future response plans. As of the end of 2023, securities firms with assets exceeding 5 trillion won must submit accountability structures to financial authorities by July 2, 2025, and other securities firms by July 2, 2026.

The FSS stated, "Through this workshop, it is expected that the securities industry's internal control capabilities will be further strengthened, including the prevention of financial accidents and the enhancement of ethical awareness among executives and employees."