Capital Markets Sector Excluded from FSC Year-End Personnel Cuts

Capital Market and Accounting Executive Personnel Completed
At Least 4 Deputy Directors Expected to Be Replaced

The Capital Markets and Accounting division of the Financial Supervisory Service (FSS) was the only unit excluded from the year-end executive personnel reshuffle. Since the division has already completed the appointment of deputy heads, only the department head appointments are expected to be made. However, the Capital Markets and Accounting division is facing numerous pressing issues such as the Koryo Zinc management dispute, Shinhan Investment Corp.'s exchange-traded fund (ETF) losses, and disciplinary actions related to wrap accounts and trust fund rollovers, indicating a heavy workload through the end of the year.

According to financial authorities on the 11th, at least four deputy heads are expected to be replaced in this year-end personnel reshuffle. The personnel changes are likely to affect the Planning & Insurance, Banking & Small Finance, and Financial Consumer Protection divisions. This is because the Capital Markets and Accounting division recently appointed Seo Jae-wan as Deputy Head of Financial Investment and Lee Seung-woo as Deputy Head of Disclosure Investigation in September. Hwang Sun-oh, who was in charge of financial investment, has moved to the Strategic Supervision division.

If the personnel changes proceed as expected, more than half of the 10 deputy heads will be replaced. Since his inauguration, FSS Governor Lee Bok-hyun has consistently emphasized "work performance" in relation to personnel decisions. At an executive meeting in July, Governor Lee stated, "The regular personnel reshuffle scheduled for the end of this year will be conducted based on work performance rather than seniority."

The trend of generational change is also expected to continue in the year-end reshuffle. In Governor Lee’s first personnel reshuffle, the first department head from the public recruitment track was appointed, and last month’s executive appointments in the Capital Markets and Accounting division saw the first executive from the public recruitment track. As this is effectively Governor Lee’s final term, it is anticipated that the generational change will finalize organizational culture reform and personnel renewal.

Although the Capital Markets and Accounting division avoided the year-end reshuffle, the tension within the division is reported to be high due to the numerous pressing issues. The Koryo Zinc management dispute is a prime example. Currently, the FSS is utilizing all available authorities within the Capital Markets and Accounting division?including disclosure review, unfair trade investigation, accounting supervision, and on-site inspections?to thoroughly examine the matter.

The Shinhan Investment Corp. ETF loss incident is one of the ongoing issues for the Financial Investment Inspection Bureau. As financial authorities have continuously emphasized internal controls within financial companies this year, a comprehensive investigation into securities firms’ ETF liquidity provider (LP) operations is underway. The wrap account and trust fund "rollover" issue is also in its final stages.

The Capital Markets Supervision Bureau, responsible for building the computerized short-selling system, is also handling a high workload. This is because short-selling will resume in March next year. To prepare, they are accelerating the development of the computerized system while communicating with securities firms.